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The Economic Holocaust

    This is an Indictment of ALL Central bankers   ----- both past and present, with no holds barred --- and no apologies

What we have belatedly now realized, is that the World is made up of two types of economists, the one being “ theoretical”  --- and the other being “practical.” Evidently at the university level where economists receive their education and diplomas or “degrees”  --- they are taught to be theoretical economists. This must be so, for few “practical” economists ever seem to surface to be the leaders in the economical field --- especially so when it comes to both banking and specifically so within the field of Central Banks!

There is a distinctive difference between theory and practice. This is common to all aspects of life and in all disciplines taught in both schools and universities. This is so because both the cause and effect always differ and especially so because the circumstances underlying each episode are NEVER EVER THE SIMILAR OR IDENTICAL.

The crazy world of economics is obsessed with either “MODELS” or “CHARTS,” The one is expected to be the solution to any problem, while the other portends to tell “of “future events”--- by tracking the PAST!! Forgotten in both cases is the fact that “ the circumstances in every case” are never the same.

Without exception, not a single Central Banker around the world today has proven himself to be “ a practical economist.” They are ALL floundering around, not knowing what to do to stem the tide of economic disaster overtaking the world today. Even more to the point, not one of them is appearing to be “individualistic”   ---- striking a path different to all the others! It seems to be that they look to the Central Bankers of the United States to find a solution to the problem, then all following the path taken by those Central Bankers to find a solution, either totalling forgetting, or worse still ignoring the fact that it was the conduct of those selfsame bankers WHO WERE THE CAUSE OF IT ALL!

While the original blame can be placed upon the “liaise faire” tenure of the previous head of the Central Bank of the United States, who evidently thought that “interest rates” were the elixir of life and the “cure-all to all economic ills, all the other Central Bankers seemed to have concurred with his assumptions   ---- and followed suit as well. A very sad reflection of theoretical economics in action!

However, what followed is the crux and the kernel to what is presently unfolding, and which if now not speedily corrected will do untold damage to the very essence and foundation to global economic structures that somehow in the past have sufficed to keep the economics or economies of the world in some sort of “working order” or in “equilibrium.” Central Bankers are presently “floundering around” like chickens who have had their heads decapitated  --- yet keep on running.

Time to get down to specifics ---- and to the practice of PRACTICAL ECONOMICS and PRACTICAL SOLUTIONS. For this to be understood it just requires a short “forerunner.”

When the US Central Bank finally woke up to the gravity of the situation and approached Congress for the authority to spend $700 Billion in a rescue operation; the politicians dithered and dallied while the world waited with “baited breath.” The entire sequence of events was flawed from the very start of the operation. Dropping interest rates re-creates the very factor that started the “economic holocaust” engulfing the world. Creating “cheap money “ to be “borrowed” by the means of cheap debt creation ---- as if the world lacked debt! Somehow forgotten within this crazy creation, is the fact that the WORLD lacks LIQUIDITY; ---- not debt ---- but M O N E Y!!

What needs to be done is to “put the fingers to the printing presses of the world’s treasuries” and print untold “trillions” of the worlds major currencies, but in an orderly fashion. We now have to digress for one moment to tell of two short stories.

When the US Treasury secretary Henry Paulson first approached the US congress to pass a bill authorizing these expenditures, it was on the understanding that the money would be utilized to buy shares in the companies and banks and financial institutions who desperately required this liquidity both for survival as well as to utilize these funds as loans to companies and small businesses who needed a constant flow of working capital requirement, or for private mortgage necessity. Repayment of these expenditures was to be recouped from taxpayers over time and/or perhaps through dividends received from the shares purchased or eventually sold.

Typically a theoretical solution to the problem. However, in the process it created MORE DEBT, and above all ---- saddled the innocent taxpayer with having to repay these monies by means of higher taxation ---- resulting in lowering an ever-dwindling supply of consumer spending power. Forgotten totally from the equation was the fact that consumer expenditures represented over 70% of annual GDP growth  ---- the very lifeblood that keeps the American economy afloat!!

 So now to the PRACTICAL ECONOMIC SOLUTION.

You put your finger on the printing presses  ---- and just print the money required. That is the obvious solution.

For the first time in the 12 years or so that this website was started, with its first article written under the heading of “ Finance and Economics”, followed by its present name when it was registered as a “dot com.” as “Economic-data,” we decided to write a direct appeal by email to CNN to offer what we thought was a “practical economic solution” --- we did not even get a response to the email. We leave it to your judgment as to whether what we had to say made sense or nonsense. We even had the audacity to quote a portion of what was sent to CNN and addressed it to the “BANK OF CANADA with some slight changes to its wording. Again we leave it to your judgment as to its practicality, for what we were endeavouring to do was to create liquidity (wealth) to be used intelligently without incurring further debt, yet solving the problem in a painless and practical manner.

Part of the email to CNN: Quote: “ To get to the point, as it seems that I will have no direct access to him (Lou Dobbs), I offer CNN the opportunity to view my website and to draw particular attention to the last two articles written, namely “Central Banks” and “ The Walls of Jericho.” You are welcome to use anything within the site that you may find to be relevant or of value ---as if it were your own. I value my own privacy and my being anonymous, requiring no recognition what so ever.

As a final comment to those two articles I have referred to: the worlds “ cookie jars” are rapidly being emptied and depleting the reserves of Central Banks are a dangerous procedure: so too is further Federal bond issues creating further debt burdens to the population. In my humble opinion the world needs a type of “Marshall Aid” now --- but not from the USA! In order to keep the nonsensical so-called cross reference values of currencies as they are presently reflected, the major Central Banks have to allow their respective treasuries to “open the printing presses and to print their own currencies to rescue their own economies. However they have to all print the same percentage to their GDP in order not to distort present cross currency values as of now. Perhaps 5% or 6% of GDP would suffice. At a later date these excess liquidity can be “sucked back” out of the economies: but more of that at another time perhaps. My website can be found at www.economic-data.com .

That was sent to CNN on September 23^rd.

Twelve to fourteen days later ---- “all hell broke loose” as --- “the shit hit the fan in Europe!

However, on Tuesday October 7^th. we sent an email to the Bank of Canada.

It started by enclosing the email sent to CNN, and went as follows:

 Quote: “ The short email enclosed below is perhaps self explanatory. Alas ---- one feels like one of those huge parabolic dishes sitting atop an American mountain, sending constant signals into outer space ---- asking --- “is anyone there? --- To be answered either by static --- or utter silence. I offer the comments I made to CNN with reference to a type of  “Marshall Aid” offered some two weeks ago, which now seems to be underway in Europe, but with a significant difference. I am no economist, and have repeated that on a number of occasions within my website. I look at problems, looking for “a new perspective” --- the third side to a coin, its edge! Then attempt to apply some type of logic as a solution.

Buying the toxic debt and expecting the taxpayer and the small investor to diminish their capital, their savings and what little value is left of their investments, seems to me both illogical and counter-productive. Added taxation diminishes their “consumer power” which is the lifeblood of any economy, as it is as well in preserving their jobs which creates their spending power. Thus asking them to buy more bonds, or more shares to replenish the capital base of the banks, companies or financial institutions all diminishes their available spending power.

What I am trying to put across as an alternative, is for Central Banks to just ---“print the money to buy up the toxic debt” --- on the understanding that, perhaps over 3 to 5 years --- that toxic debt has to be “bought back” ---and written off their books as losses over the years. By buying this back from the Central Banks it returns the excessive liquidity from the system, to be gradually brought into equilibrium as GDP growth within the economy takes place. Although I suggested to CNN that it be 5% to 6% of GDP --- in light of what is apparent in Europe at the moment, I would up those percentages t0 7 to 8 per cent of GDP. The French President’s speech at the UN should be your “Mantra.” And finally --- if you can spend an hour   --- I humbly suggest you read those two articles on my website --- “Central Banks” and “The Walls of Jericho” both written some time ago.

Kind regards and Good Luck. "The Author” .  

While one understands that Central Bankers presently do not have the power to enact law, they have always had the power to advise or even coerce “government” to enact the necessary laws and regulations needed to safeguard their National economies, as well as what may be required to safeguard global economic equilibrium. They have as well always had the opportunity to request the legal right to enact law with the power to oversee and punish transgressors, as has been the right of the World Bank, the IMF and the WTO. They have always had the right to oversee the functions of the financial institutions, including those of the stock exchanges, but have made a sorry mess of this oversight privilege!

In conclusion, we repeat what has been unfolding in Europe where government after government has been guarantying all the savings and investment funds held by their National commercial banks  --- no matter how large the sums held ---- purely to stave off “a run on the banks” by depositors, knowing full well that their Reserve Banks and Financial institutions do not have the required TRILLIONS of their respective currencies to back up these “GUARANTEES!”

So in the event that they would have or may have to do that very thing one day:

PRINT IT NOW AND SAVE THE POSSIBILITY OF HAVING TO DO IT UNDER WORSE CIRCUMSTANCES IN THE FUTURE !!

Addendum

EUPHORIA

Euphoria --- “ a sense of bliss or well-being.” How wrong can they be? Thousands upon thousands of so-called economists who say that the recession is over. The daily financial media echoing those sentiments, resulting in enhanced stock market activity worldwide --- and stock prices rising as a result --- only to fall again as contrary economic news is disseminated hours or a day or two later.

Stock markets, because they are “locked together” due to foreign investment diversification --- should be rising or falling in tandem as they reflect common global economic activity and news services. Yet this is not what is happening. Thus one has to suspect market manipulation. Common economic denominators should produce common results --- yet when American and European markets tumble as a result of Global bad Economic News --- Asian Markets show remarkable price increases! And the reverse happened when Asian markets fall!

The G7 ---8 --- 12 --- 20 --- and 30 dithers and “look for consensus” BEFORE HEADING BACK HOME! Having accomplished little or nothing. The problem is no one thinks or acts in A GLOBAL CONCEPT. They are dealing with global problems --- but are primarily concerned with their domestic economies --- forgetting --- that without saving the global problem  ---- THEIR DOMESTIC ECONOMIES WILL FAIL!

In the closing months of the year 2008 we wrote an article titled “The Economic Holocaust” which dealt with the global debt problem and how it should be attended to. Alas little was done --- other than to CONFOUND THE PROBLEM ___ by creating --- MASSIVE NEW GLOBAL DEBT!

As a result --- the ECONOMIC HOLOCAUST is now starting to unravel as of February in the year 2010.

            BEWARE THE IDES OF MARCH.

As the month of February comes towards its end, markets start to work in tandem, falling in unison and showing the first signs that that the DEBT BUBBLE is about to UNRAVEL!.

This time Europe is destined to lead the way. Unless some thing entirely economically “ unorthodox “ is attempted by Central Bankers --- ACTING IN UNISON is done  --- the entire fabric of the GLOBAL ECONOMY will start to unravel. In which case it will become unstoppable!

Essentially what has been happening over the years, is that “everyone has been taking in each other’s dirty washing” --- and now we are “running out of CLOTHES to wash!” In other words --- running out of MONEY. The tempo of debt creation is the culprit --- and it is the now unfolding debt requirement --- which Central Bankers and economists think will SOLVE THE PROBLEM --- will in actual fact trigger the ECONOMIC HOLOCAUST! 

Europe is in the process of issuing sovereign debt in order to balance budgets, pay for maturing “old debt” at the same time as their domestic economic structures (companies) are seeking new capital by bond and share issues --- in order to remain “alive” as the dwindling consumer wealth attempts to cope with it all during a recessionary phase where economies are contracting with consequent job losses. Who is there to buy all this debt? Every “PENNY” you suck out of the consumer’s pocket to purchase bonds and shares  --- leaves domestic economies without the required “disposable income” to support their domestic economies. So it is not only Europe, which is about to unleash this torrent of debt, but 90 % of the trading nations who are “hell-bent: on doing likewise! Consequently, as each country and its “economy” seeks capital, higher and higher “yields” will be offered on those bonds, in order to entice investors to their individual bond offerings.

Brussels may attempt to “guarantee” the sovereign debt issues forthcoming from it’s members instead of actually providing “cash” or Euro --- but one wonders whether this can be “sold” to investors even if there still is the actual money available to accomplish this. Neither Breton Woods nor the Basle Agreement could have foreseen what began to unfold when “GLOBALISATION was born. The debt creation needed to accomplish and sustain global trade  --- and trade imbalances that defy currency value correction make no “economic sense”  --- putting aside as well the massive debt fraud that was spawned in it’s wake.

There is but ONE possible solution that could possibly stop the global economic fabric from unravelling, and it lies within the remark of “UNORTHODOX” economics as stated in the second paragraph stated below the remark BEWARE THE IDES OF MARCH.

In 2007 we offered the solution. PRINT THE MONEY REQUIRED. In other words --- stop relying on “IOU’S” as a solution --- use CASH! Allow all countries to print their currencies to the SAME PERCENTAGE of their gross domestic product --- or to the same percentage as the difference in value between their GDP and their debt obligations. In other words --- “do your own washing, “ using your own money for a change!

OTHERWISE --- WHEN THE DUNG HITS

THE FAN --- WE WILL --- ALL BE DONE FOR.