FEDERAL RESERVE BANK
WASHINGTON, D.C.
Also published in Asia at:
http://www.futurefastforward.com/component/content/article/425
Seven Steps to Transform the Global Financial "Crisis"
by Alfred Lambremont Webre, JD, MEd
VANCOUVER, B.C. (Oct. 6, 2008) - In "As Europe falls into the Abyss," UK journalist Ambrose Evan-Pritchard writes:
"We face extreme danger. Unless there is immediate intervention on every
front by all the major powers acting in concert, we risk a
disintegration of global finance within days. Nobody will be spared,
unless they own gold bars." (See Appendix II for full article below).
Source of the Present Economic Crisis
To find the fundamental cause of this economic crisis - the original moving force of this economic Black Hole into which the Globalist Financial system is being drawn - we must travel back to 1914 and the establishment of the Federal Reserve Bank by the two principal Rothschild representatives in the United States, J.P. Morgan and Kuhn Loeb & Co.
You can click here or go to Appendix II to view a chart of who "owns" the Federal Reserve as recently as 1976.
Chart of Who "owns" the Federal Reserve Bank
By the evidence, the Federal Reserve Bank has functionally served as a front organization for the Rothschild (City of London) interests since its inception in 1914.
All U.S. currency since 1914 has been the private property of the Federal Reserve and hence of the Rothschild interests. You do not own any of the money in your U.S. bank account or the U.S. dollars in your wallet. Those U.S. Dollars are the private property of the Federal Reserve, which are being temporarily used by you under implied licensed from the Federal Reserve for the exchange of good and services. As you shall see the implications of this legal truth have been devastating for us all.
Following the 1944 Bretton Woods Agreements, the U.S. Dollar was made the international reserve currency. By owning all of the U.S. Dollars in the world, the Federal Reserve - the Rothschild interests - have controlled the U.S. Dollar throughput in all world investment, manufacture, trade, commerce, property and labour - in sum in the entire U.S. Dollar-based economy. Parties who have thought they "owned" these U.S. Dollars in fact have only had an implied license from the Federal Reserve to engage in exchange of goods and services with these U.S. Dollars.
Rather than act as a proper publicly owned and controlled Central Bank, creating money and credit as a public utility, the Federal Reserve Bank has functioned as a Financial False Flag operator.
A Financial False Flag
The current Globalist Financial Crisis is a Financial False Flag operation. It is a controlled collapse of the globalist economic system, engineered by an international war crimes racketeering organization. The globalist financial system is being intentionally destabilized with the same technologies that the government of Salvador Allende was destabilized in Chile by Henry Kissinger and Richard Nixon on behalf of David Rockefeller and the Rothschilds, resulting in Allende's assassination on September 11, 1973.
The Financial False Flag designed to accelerate the deterioration of First World economies, democracies, and prosperity, in aid of a larger program of global depopulation. The same powers who control the Federal Reserve Bank are intent on depopulating between 1/3 and 2/3 of the current human population, in service to a grotesque covert elite plan.
Solution to the "Crisis"
There is no crisis. The "crisis" is a False Flag economic destabilization, a False Flag attack. Therefore, eliminate the enemy that created the False Flag attack - the Federal Reserve Bank - as a first step.
STEP A. ABOLISH THE FEDERAL RESERVE BANK
Abolish the Federal Reserve Bank. Rep Ron Paul (Rep.- Texas) has proposed a Federal Reserve Board Abolition Act.
As soon as the profit is taken out of controlling U.S. Dollars as a reserve currency, the Rothschild interests will move out of this arena.
STEP B. CREATE A U.S. CENTRAL BANK AS A PUBLIC UTILITY
This is a policy advocated for Canada by the Hon. Paul Hellyer, former Deputy Prime Minister of Canada. Hellyer advocates the Bank of Canada as a public utility.
The U.S. Central Bank, a government agency, is to function as a public utility, issuing publicly owned monies that by law must be fully back by gold or silver.
All Federal Reserve Notes are declared null and void. Federal Reserve Notes may be exchanged for U.S. Treasury bank notes up to a maximum of $250,000.00 per person.
In the interim, while the Central Bank is being created, the U.S. Treasury will issue silver-backed Treasury Bank notes under the authority of the Executive Order signed by Pres John F. Kennedy shortly before his assassination on November 22, 1963.
STEP C: END THE MONOPOLY OF BANKS ON THE CREATION OF MONEY
The solution to the banking crisis of the 1930s was to break the control of the banks on creating money as debt. As long as banks have a monopoly on the creation of money this problem will persist because banks will insist on creating money as debt to enslave us. Some publicly-controlled institution, other than the banks, has to be created to create money.
As we set out in Step B, this solution is through the Central Bank with money as a public utility. In Canada, this goal can be accomplished through the Bank of Canada as a public utility. The U.S. Treasury Department has the same inherent power (as John F. Kennedy demonstrated, which may have cost him his life), as an interim step to the creation of a U.S. Central Bank.
The simplest, most direct way to create alternative money to bank-created money debt is a Guaranteed Annual Income for every individual in society, paid out by public money from the Central Bank.
STEP D. U.S. GOVERNMENT DEFAULTS ON ALL OF ITS DEBT OBLIGATIONS BROUGHT ABOUT BY THE POLICIES OF THE FEDERAL RESERVE BANK
The U.S. public debt of $10.1 trillion is the direct result of False Flag operations of the Federal Reserve, designed to maximize profits of the Rothschild interests, enslave the U.S. and world populations in debt, and position the human population for an intentional depopulation program.
Therefore, there is a a force majeure which morally and legally justifies the U.S. government in repudiating these debts, which in any event are in U.S. Dollars, property of the Federal Reserve.
STEP E. FORGIVENESS OF ALL PUBLIC DEBT, WORLD-WIDE
The forgiveness of all public debt, worldwide, with priority to developing nations debt.
STEP F. DE-CENTRALIZED COORDINATION OF A NEW ECONOMY
The transformation of the war economy into a sustainable, peaceful, cooperative, de-centralized, New Energy based economy, where barter and trade arrangements are encouraged, and money is highly decentralized in national central banks, fully backed by precious metals.
STEP G. A FINANCIAL WAR CRIMES TRIBUNAL
A competent international war crimes tribunal for war crimes, crimes against humanity, genocide resulting from financial crimes, with full jurisdiction, prosecutorial authorit, staff and budget to pierce the corporate veil and pursue the international war crimes racketeering organization.
APPENDIX I
Federal Reserve Board Abolition Act (Introduced in House)
Rep. Ron Paul
http://www.house.gov/paul/
HR 2755 IH
110th CONGRESS
1st Session
H. R. 2755
To abolish the Board of Governors of the Federal Reserve System and the
Federal reserve banks, to repeal the Federal Reserve Act , and for
other purposes.
IN THE HOUSE OF REPRESENTATIVES
June 15, 2007
Mr. PAUL introduced the following bill; which was referred to the Committee on Financial Services
A BILL
To abolish the Board of Governors of the Federal Reserve System and the
Federal reserve banks, to repeal the Federal Reserve Act , and for
other purposes.
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the `Federal Reserve Board Abolition Act' .
SEC. 2. FEDERAL RESERVE BOARD ABOLISHED.
(a) In General- Effective at the end of the 1-year period
beginning on the date of the enactment of this Act , the Board of
Governors of the Federal Reserve System and each Federal reserve bank
are hereby abolished.
(b) Repeal of Federal Reserve Act - Effective at the end of the
1-year period beginning on the date of the enactment of this Act , the
Federal Reserve Act is hereby repealed.
(c) Disposition of Affairs-
(1) MANAGEMENT DURING DISSOLUTION PERIOD- During the 1-year period
referred to in subsection (a), the Chairman of the Board of Governors
of the Federal Reserve System--
(A) shall, for the sole purpose of winding up the affairs of the
Board of Governors of the Federal Reserve System and the Federal
reserve banks--
(i) manage the employees of the Board and each such bank and
provide for the payment of compensation and benefits of any such
employee which accrue before the position of such employee is
abolished; and
(ii) manage the assets and liabilities of the Board and each such
bank until such assets and liabilities are liquidated or assumed by the
Secretary of the Treasury in accordance with this subsection; and
(B) may take such other action as may be necessary, subject to the
approval of the Secretary of the Treasury, to wind up the affairs of
the Board and the Federal reserve banks.
(2) LIQUIDATION OF ASSETS-
(A) IN GENERAL- The Director of the Office of Management and
Budget shall liquidate all assets of the Board and the Federal reserve
banks in an orderly manner so as to achieve as expeditious a
liquidation as may be practical while maximizing the return to the
Treasury.
(B) TRANSFER TO TREASURY- After satisfying all claims against the
Board and any Federal reserve bank which are accepted by the Director
of the Office of Management and Budget and redeeming the stock of such
banks, the net proceeds of the liquidation under subparagraph (A) shall
be transferred to the Secretary of the Treasury and deposited in the
General Fund of the Treasury.
(3) ASSUMPTION OF LIABILITIES- All outstanding liabilities of the
Board of Governors of the Federal Reserve System and the Federal
reserve banks at the time such entities are abolished, including any
liability for retirement and other benefits for former officers and
employees of the Board or any such bank in accordance with employee
retirement and benefit programs of the Board and any such bank, shall
become the liability of the Secretary of the Treasury and shall be paid
from amounts deposited in the general fund pursuant to paragraph (2)
which are hereby appropriated for such purpose until all such
liabilities are satisfied.
(d) Report- At the end of the 18-month period beginning on the
date of the enactment of this Act , the Secretary of the Treasury and
the Director of the Office of Management and Budget shall submit a
joint report to the Congress containing a detailed description of the
actions taken to implement this Act and any actions or issues relating
to such implementation that remain uncompleted or unresolved as of the
date of the report.
H.R.2755
Title: To abolish the Board of Governors of the Federal Reserve System
and the Federal reserve banks, to repeal the Federal Reserve Act, and
for other purposes.
Sponsor: Rep Paul, Ron [TX-14] (introduced 6/15/2007) Cosponsors (None)
Latest Major Action: 6/15/2007 Referred to House committee. Status: Referred to the House Committee on Financial Services.
FEDERAL RESERVE BANK, WASHINGTON, DC
APPENDIX II
Who Owns and Controls the Federal Reserve Bank?
Supplementary Reading - The subject of who actually owns and controls the Federal Reserve is an open issue for continuing investigative research. Here are some useful articles on the subject that supplement the classic 1976 Chart.
CLOBALRESEARCH.CA - Who Owns The Federal Reserve?
The Fed is privately owned. Its shareholders are private banks
by Ellen Brown
http://www.globalresearch.ca/index.php?context=va&aid=10489
NEWS FROM THE WEST (May 16, 2008)
Chart of who "owns" the Federal Reserve
Updating the context of the 1976 Chart
http://newsfromthewest.blogspot.com/2008/05/who-owns-federal-reserve.html
Who Owns and Controls the Federal Reserve?
by Dr. Edward Flaherty, University of Charleston
http://www.usagold.com/federalreserve.html
CHART OF WHO OWNS THE FEDERAL RESERVE
http://peaceinspace.blogs.com/911/2008/10/who-owns-the-federal-reserve-bank.html
Chart 1
Federal Reserve Directors: A Study of Corporate and Banking Influence
Published 1976
Chart 1 reveals the linear connection between the Rothschilds and the Bank
of England, and the London banking houses which ultimately control the
Federal Reserve Banks through their stockholdings of bank stock and their
subsidiary firms in New York. The two principal Rothschild representatives
in New York, J. P. Morgan Co., and Kuhn,Loeb & Co. were the firms which
set up the Jekyll Island Conference at which the Federal Reserve Act was
drafted, who directed the subsequent successful campaign to have the plan
enacted into law by Congress, and who purchased the controlling amounts
of stock in the Federal Reserve Bank of New York in 1914. These firms
had their principal officers appointed to the Federal Reserve Board of
Governors and the Federal Advisory Council in 1914. In 1914 a few
families (blood or business related) owning controlling stock in existing
banks (such as in New York City) caused those banks to purchase controlling
shares in the Federal Reserve regional banks. Examination of the charts
and text in the House Banking Committee Staff Report of August, 1976
and the current stockholders list of the 12 regional Federal Reserve
Banks show this same family control.
N.M. Rothschild , London - Bank of England
______________________________________
| |
| J. Henry Schroder
| Banking | Corp.
| |
Brown, Shipley - Morgan Grenfell - Lazard - |
& Company & Company Brothers |
| | | |
--------------------| -------| | |
| | | | | |
Alex Brown - Brown Bros. - Lord Mantagu - Morgan et Cie -- Lazard ---|
& Son | Harriman Norman | Paris Bros |
| | / | N.Y. |
| | | | | |
| Governor, Bank | J.P. Morgan Co -- Lazard ---|
| of England / N.Y. Morgan Freres |
| 1924-1938 / Guaranty Co. Paris |
| / Morgan Stanley Co. | /
| / | \Schroder Bank
| / | Hamburg/Berlin
| / Drexel & Company /
| / Philadelphia /
| / /
| / Lord Airlie
| / /
| / M. M. Warburg Chmn J. Henry Schroder
| | Hamburg --------- marr. Virginia F. Ryan
| | | grand-daughter of Otto
| | | Kahn of Kuhn Loeb Co.
| | |
| | |
Lehman Brothers N.Y -------------- Kuhn Loeb Co. N. Y.
| | --------------------------
µ
| | | |
8
| | | |
Lehman Brothers - Mont. Alabama Solomon Loeb Abraham Kuhn
| | __|______________________|_________
Lehman-Stern, New Orleans Jacob Schiff/Theresa Loeb Nina Loeb/Paul Warburg
------------------------- | | |
| | Mortimer Schiff James Paul Warburg
_____________|_______________/ |
| | | | |
Mayer Lehman | Emmanuel Lehman \
| | | \
Herbert Lehman Irving Lehman \
| | | \
Arthur Lehman \ Phillip Lehman John Schiff/Edith Brevoort Baker
/ | Present Chairman Lehman Bros
/ Robert Owen Lehman Kuhn Loeb - Granddaughter of
/ | George F. Baker
| / |
| / |
| / Lehman Bros Kuhn Loeb (1980)
| / |
| / Thomas Fortune Ryan
| | |
| | |
Federal Reserve Bank Of New York |
|||||||| |
______National City Bank N. Y. |
| | |
| National Bank of Commerce N.Y ---|
| | \
| Hanover National Bank N.Y. \
| | \
| Chase National Bank N.Y. \
| |
| |
Shareholders - National City Bank - N.Y. |
----------------------------------------- |
| /
James Stillman /
Elsie m. William Rockefeller /
Isabel m. Percy Rockefeller /
William Rockefeller Shareholders - National Bank of Commerce N. Y.
J. P. Morgan -----------------------------------------------
M.T. Pyne Equitable Life - J.P. Morgan
Percy Pyne Mutual Life - J.P. Morgan
J.W. Sterling H.P. Davison - J. P. Morgan
NY Trust/NY Edison Mary W. Harriman
Shearman & Sterling A.D. Jiullard - North British Merc. Insurance
| Jacob Schiff
| Thomas F. Ryan
| Paul Warburg
| Levi P. Morton - Guaranty Trust - J. P. Morgan
|
|
Shareholders - First National Bank of N.Y.
-------------------------------------------
J.P. Morgan
George F. Baker
George F. Baker Jr.
Edith Brevoort Baker
US Congress - 1946-64
|
|
|
|
|
Shareholders - Hanover National Bank N.Y.
------------------------------------------
James Stillman
William Rockefeller
|
|
|
|
|
Shareholders - Chase National Bank N.Y.
---------------------------------------
George F. Baker
Chart 2
Federal Reserve Directors: A Study of Corporate and Banking Influence
- Published 1983
The J. Henry Schroder Banking Company chart encompasses the entire history
of the twentieth century, embracing as it does the program (Belgium Relief
Commission) which provisioned Germany from 1915-1918 and dissuaded Germany
from seeking peace in 1916; financing Hitler in 1933 so as to make a Second
World War possible; backing the Presidential campaign of Herbert Hoover ;
and even at the present time, having two of its major executives of its
subsidiary firm, Bechtel Corporation serving as Secretary of Defense and
Secretary of State in the Reagan Administration.
The head of the Bank of England since 1973, Sir Gordon Richardson, Governor
of the Bank of England (controlled by the House of Rothschild) was chairman
of J. Henry Schroder Wagg and Company of London from 1963-72, and director
of J. Henry Schroder,New York and Schroder Banking Corporation,New York,as
well as Lloyd's Bank of London, and Rolls Royce. He maintains a residence
on Sutton Place in New York City, and as head of "The London Connection,"
can be said to be the single most influential banker in the world.
J. Henry Schroder
-----------------
|
|
|
Baron Rudolph Von Schroder
Hamburg - 1858 - 1934
|
|
|
Baron Bruno Von Schroder
Hamburg - 1867 - 1940
F. C. Tiarks |
1874-1952 |
| |
marr. Emma Franziska |
(Hamburg) Helmut B. Schroder
J. Henry Schroder 1902 |
Dir. Bank of England |
Dir. Anglo-Iranian |
Oil Company J. Henry Schroder Banking Company N.Y.
|
|
J. Henry Schroder Trust Company N.Y.
|
|
|
___________________|____________________
| |
Allen Dulles John Foster Dulles
Sullivan & Cromwell Sullivan & Cromwell
Director - CIA U. S. Secretary of State
Rockefeller Foundation
Prentiss Gray
------------
Belgian Relief Comm. Lord Airlie
Chief Marine Transportation -----------
US Food Administration WW I Chairman; Virgina Fortune
Manati Sugar Co. American & Ryan daughter of Otto Kahn
British Continental Corp. of Kuhn,Loeb Co.
| |
| |
M. E. Rionda |
------------ |
Pres. Cuba Cane Sugar Co. |
Manati Sugar Co. many other |
sugar companies. _______|
| |
| |
G. A. Zabriskie |
--------------- | Emile Francoui
Chmn U.S. Sugar Equalization | --------------
Board 1917-18; Pres Empire | Belgian Relief Comm. Kai
Biscuit Co., Columbia Baking | Ping Coal Mines, Tientsin
Co. , Southern Baking Co. | Railroad,Congo Copper, La
| Banque Nationale de Belgique
Suite 2000 42 Broadway | N. Y |
__________________________|___________________________|_
| | |
| | |
Edgar Richard Julius H. Barnes Herbert Hoover
------------- ---------------- --------------
Belgium Relief Comm Belgium Relief Comm Chmn Belgium Relief Com
Amer Relief Comm Pres Grain Corp. U.S. Food Admin
U.S. Food Admin U.S. Food Admin Sec of Commerce 1924-28
1918-24, Hazeltine Corp. 1917-18, C.B Pitney Kaiping Coal Mines
| Bowes Corp, Manati Congo Copper, President
| Sugar Corp. U.S. 1928-32
|
|
|
John Lowery Simpson
-------------------
Sacramento,Calif Belgium Relief |
Comm. U. S. Food Administration Baron Kurt Von Schroder
Prentiss Gray Co. J. Henry Schroder -----------------------
Trust, Schroder-Rockefeller, Chmn Schroder Banking Corp. J.H. Stein
Fin Comm, Bechtel International Bankhaus (Hitler's personal bank
Co. Bechtel Co. (Casper Weinberger account) served on board of all
Sec of Defense, George P. Schultz German subsidiaries of ITT . Bank
Sec of State (Reagan Admin). for International Settlements,
| SS Senior Group Leader,Himmler's
| Circle of Friends (Nazi Fund),
| Deutsche Reichsbank,president
|
|
Schroder-Rockefeller & Co. , N.Y.
---------------------------------
Avery Rockefeller, J. Henry Schroder
Banking Corp., Bechtel Co., Bechtel
International Co. , Canadian Bechtel
Company. |
|
|
|
Gordon Richardson
-----------------
Governor, Bank of England
1973-PRESENT C.B. of J. Henry Schroder N.Y.
Schroder Banking Co., New York, Lloyds Bank
Rolls Royce
Chart 3
Federal Reserve Directors: A Study of Corporate and Banking Influence
- Published 1976
The David Rockefeller chart shows the link between the Federal Reserve
Bank of New York,Standard Oil of Indiana,General Motors and Allied
Chemical Corportion (Eugene Meyer family) and Equitable Life (J. P. Morgan).
DAVID ROCKEFELLER
----------------------------
Chairman of the Board
Chase Manhattan Corp
|
|
______|_______________________
Chase Manhattan Corp. |
Officer & Director Interlocks|---------------------
------|----------------------- |
| |
Private Investment Co. for America Allied Chemicals Corp.
| |
Firestone Tire & Rubber Company General Motors
| |
Orion Multinational Services Ltd. Rockefeller Family & Associates
| |
ASARCO. Inc Chrysler Corp.
| |
Southern Peru Copper Corp. Intl' Basic Economy Corp.
| |
Industrial Minerva Mexico S.A. R.H. Macy & Co.
| |
Continental Corp. Selected Risk Investments S.A.
| |
Honeywell Inc. Omega Fund, Inc.
| |
Northwest Airlines, Inc. Squibb Corporation
| |
Northwestern Bell Telephone Co. Olin Foundation
| |
Minnesota Mining & Mfg Co (3M) Mutual Benefit Life Ins. Co. of NJ
| |
American Express Co. AT & T
| |
Hewlett Packard Pacific Northwestern Bell Co.
| |
FMC Corporation BeachviLime Ltd.
| |
Utah Intl' Inc. Eveleth Expansion Company
| |
Exxon Corporation Fidelity Union Bancorporation
| |
International Nickel/Canada Cypress Woods Corporation
| |
Federated Capital Corporation Intl' Minerals & Chemical Corp.
| |
Equitable Life Assurance Soc U.S. Burlington Industries
| |
Federated Dept Stores Wachovia Corporation
| |
General Electric Jefferson Pilot Corporation
| |
Scott Paper Co. R. J. Reynolds Industries Inc.
| |
American Petroleum Institute United States Steel Corp.
| |
Richardson Merril Inc. Metropolitan Life Insurance Co.
| |
May Department Stores Co. Norton-Simon Inc.
| |
Sperry Rand Corporation Stone-Webster Inc.
| |
San Salvador Development Company Standard Oil of Indiana
Chart 4
Federal Reserve Directors: A Study of Corporate and Banking Influence
- Published 1976
This chart shows the interlocks between the Federal Reserve Bank of New York
J. Henry Schroder Banking Corp., J. Henry Schroder Trust Co., Rockefeller
Center, Inc., Equitable Life Assurance Society ( J.P. Morgan), and the
Federal Reserve Bank of Boston.
Alan Pifer, President
Carnegie Corporation
of New York
----------------------
|
|
----------------------
Carnegie Corporation
Trustee Interlocks --------------------------
---------------------- |
| |
Rockefeller Center, Inc J. Henry Schroder Trust Company
| |
The Cabot Corporation Paul Revere Investors, Inc.
| |
Federal Reserve Bank of Boston Qualpeco, Inc.
|
Owens Corning Fiberglas
|
New England Telephone Co.
|
Fisher Scientific Company
|
Mellon National Corporation
|
Equitable Life Assurance Society
|
Twentieth Century Fox Corporation
|
J. Henry Schroder Banking Corporation
Chart 5
Federal Reserve Directors: A Study of Corporate and Banking Influence
- Published 1976
This chart shows the link between the Federal Reserve Bank of New York,
Brown Brothers Harriman,Sun Life Assurance Co. (N.M. Rothschild and Sons),
and the Rockefeller Foundation.
Maurice F. Granville
Chairman of The Board
Texaco Incorporated
----------------------
|
|
Texaco Officer & Director Interlocks ---------------- Liggett & Myers, Inc.
------------------------------------ |
| |
| |
L Arabian American Oil Company St John d'el Ray Mining Co. Ltd.
O | |
N Brown Brothers Harriman & Co. National Steel Corporation
D | |
O Brown Harriman & Intl' Banks Ltd. Massey-Ferguson Ltd.
N | |
American Express Mutual Life Insurance Co.
| |
N. American Express Intl' Banking Corp. Mass Mutual Income Investors Inc.
M. | |
Anaconda United Services Life Ins. Co.
R | |
O Rockefeller Foundation Fairchild Industries
T | |
H Owens-Corning Fiberglas Blount, Inc.
S | |
C National City Bank (Cleveland) William Wrigley Jr. Co
H | |
I Sun Life Assurance Co. National Blvd. Bank of Chicago
L | |
D General Reinsurance Lykes Youngstown Corporation
| |
General Electric (NBC) Inmount Corporation
**
Source: Federal Reserve Directors: A Study of Corporate and Banking
Influence. Staff Report,Committee on Banking,Currency and Housing,
House of Representatives, 94th Congress, 2nd Session, August 1976.
APPENDIX III
Futurefastforward.com
Germany Takes Hot Seat As Europe Falls Into the Abyss -
By Ambrose Evans-Pritchard, Telegraph UK
Ambrose Evans-Pritchard, Telegraph UK
Tuesday, 07 October 2008 00:38
We face extreme danger. Unless there is immediate intervention on every front by all the major powers acting in concert, we risk a disintegration of global finance within days. Nobody will be spared, unless they own gold bars.
Telegraph UK, 6th October 2008,
Investors will learn today whether the Paulson bail-out - fattened to $850bn (£480bn) by Congress - can begin to halt the death spiral in the credit system. So far, the response looks terrible.
Germany is now in the hot seat. The collapse of a rescue deal for Hypo Real Estate on Saturday threatens a €400bn (£311bn) bankruptcy that nearly matches the Lehman Brothers debacle for sheer scale.
Chancellor Angela Merkel has been forced to pull her head out of the sand, guaranteeing all German savings, a day after she rebuked Ireland for doing much the same thing. Reality intrudes.
During the past week, we have tipped over the edge, into the middle of the abyss. Systemic collapse is in full train. The Netherlands has just rushed through a second, more sweeping nationalisation of Fortis. Ireland and Greece have had to rescue all their banks. Iceland is facing an Argentine denouement.
The US commercial paper market is closed. It shrank $95bn last week, and has lost $208bn in three weeks. The interbank lending market has seized up. There are almost no bids. It is a ghost market. Healthy companies cannot roll over debt. Some will have to sack staff today to stave off default.
As the unflappable Warren Buffett puts it, the credit freeze is “sucking blood” out of the economy. “In my adult lifetime, I don’t think I’ve ever seen people as fearful,” he said.
We are fast approaching the point of no return. The only way out of this calamitous descent is “shock and awe” on a global scale, and even that may not be enough.
Drastic rate cuts would be a good start. Central bankers still paralysed by a misplaced fear of inflation – whether in Europe, Britain, or the US – have become a public menace and should be held to severe account by our democracies. The imminent and massive danger is now self-feeding debt deflation.
The lesson of the 1930s is that any country trying to reflate in isolation will be punished. The crisis will ricochet from one economy to another until every one is crippled. We are seeing it play again in this drama as our leaders fail to rise above their narrow, parochial agendas.
The European Central Bank – which raised rates into the teeth of the crisis in July – has played a shockingly destructive role in this enveloping slump. Its growth predictions this year have been, and still are, delusional. Neglecting its global role, it has vastly complicated the fire-fighting efforts of Washington.
It could have offered “cover” to the US Federal Reserve this spring when Ben Bernanke was forced by events to slash rates to 2pc. It could at least have signalled an end to monetary tightening. That is how an ally ought to behave.
Instead, it stuck maniacally to its Gothic script, with equally unhappy consequences for both sides of the Atlantic, as well as for China, Japan, and India. The euro rocketed yet further, which it turn set off an oil shock as crude metamorphosed into an anti-dollar with leverage.
The ECB policy was self-defeating, even on its own terms. It merely drove headline inflation even higher, while deeper forces of underlying debt deflation pulled the real economies of Germany, Italy, France, and Spain into a recessionary vortex.
Far from offering reassurance, the weekend mini-summit of EU leaders served only to highlight that nobody is in charge of this runaway train. There is still no lender of last resort in euroland. The £12bn stimulus package is risible.
Angela Merkel has revealed her deep limitations. It was she who vetoed French efforts to launch a pan-EU rescue package, suspecting that any lifeboat fund would prove to be Trojan Horse – a way of co-opting German taxpayers into colossal transfers of wealth to Latin Europe.
In that she is right, but it is too late now for dysfunctional EU political games. By demanding that those who caused the damage should pay for it, she crossed the line into caricature, or worse.
Her comments echo word for word the “we’re alright Jack” attitudes of Euro-pols during the first US banking crises in 1930-1931, until the storm hit Europe and the entire cast was swept away by furious electorates, or simply shot. Thankfully, this EU stupidity is at last drawing serious criticism.
“We have to make sure Europe takes its responsibilities, like the US: action must be taken quickly and in a concerted manner,” said IMF chief Dominique Strauss-Kahn.
As for the US itself, it has not yet exhausted its policy arsenal. It can escalate further up the nuclear ladder. The Fed can cut interest rates from 2pc to zero. If that fails, it can let rip with the mass purchase of US debt.
“The US government has a technology, called a printing press,” said Fed chief Ben Bernanke in November 2002. (His helicopter speech).
In extremis, the Treasury/Fed can swoop into any market to shore up asset prices. They can buy Florida property. They can even buy SUV guzzlers from the car lots in Detroit, and mangle them in scrap yards. As Bernanke put it, the Fed can “expand the menu of assets that it buys.”
There is a devilish catch to this ploy, of course. It assumes that foreign creditors will tolerate such action.
Japan entered its Lost Decade as the world’s top creditor, with a vast pool of household savings to cushion the slump. America starts its purge with net external liabilities of $3 trillion, and a savings rate near zero. Foreigners own over half the US Treasury debt, and two thirds of all Fannie, Freddie, and other US agency bonds.
But the risk of a dollar collapse is one for the distant future. Right now the world faces the opposite problem. There is a wild scramble for dollars as a $10 trillion pyramid of global lending based on dollar balance sheets “delevers” with a vengeance.
This is a “short squeeze” on those who have used the dollar for a vast global carry trade. International banks are facing margin calls on their dollar leverage. It is why the Fed is having to provide $1.25 trillion in dollar liquidity for the entire global system, according to estimates by Brad Setser from the Center for Geoeconomic Studies.
The crisis engulfing Europe, Asia and emerging markets, makes life easier for Washington. The United States is becoming a safe-haven again.
The Fed can now hope to pursue monetary stimulus “a l’outrance” without being slapped down by the currency, debt, and commodity markets. Take comfort where you can.
VIEW/COMMENT ON THIS ARTICLE:
http://peaceinspace.blogs.com/911/2008/10/cap-policies-solution-to-global-financial-crisis.html
