632 Asset bubbles and No Jobs - both caused by Globalization, but Elite maintains course

Asset bubbles and No Jobs - both caused by Globalization, but Elite
maintains course

Newsletter published on 29 December 2013

(1) No Jobs - a problem for the Workers
(2) No Jobs - a problem for the Elite, when Populist movements smash the
Established Parties
(3) Asset bubbles & Financial Crisis caused by Mercantilist economies'
"Savings Glut" - John Craig
(4) Debt explosion real story of Fed QE dance - Gillian Tett, Financial
Times
(5) The Failure of Free-Market Finance, by Adair Turner
(6) We still live in Lehman's shadow, by Martin Wolf
(7) Wolf admits the glut still exists, but wants Asset Bubble policies
to continue
(8) Revelations from a Swiss banker: Bankers pay Hit Men; Bilderbergers
destroy our industry

(1) No Jobs - a problem for the Workers

http://www.businessspectator.com.au/article/2013/12/11/manufacturing/abbott-manufacturing-jobs-disaster

Abbott is manufacturing a jobs disaster

Michael Gawenda11 Dec, 6:59 AM 72

Ten years ago, when I was editor of The Age, hundreds of people gathered
in the basement of the old Age building in Spencer Street, in the empty
space that was once filled with presses and linotype machines and
hundreds of bales of paper, to celebrate the opening of the paper’s new
$220 million printing plant at Tullamarine.

Federal and state politicians were there as well as most of Melbourne’s
business elite. This was a big day for The Age and for Melbourne. The
new printing plant – a five-storey, architect-designed, ribbed-steel
building was a sign of confidence in Victoria’s future in manufacturing.
Not to mention in newspapers.

The premier, Steve Bracks, made a speech in which he said how proud he
was to open the plant, which he described as “one of the most advanced
printing plants in the world”. It was, he said, a day that made all
Victorians proud because the plant pointed to a bright future for the state.

The plant at Tullamarine will now soon close. The digital revolution has
rendered it an industrial dinosaur. The plant was built because the old
presses in Spencer Street couldn’t cope with the huge Saturday paper,
stuffed full with classifieds. It was built essentially for that
Saturday paper on which The Age’s prosperity had been based for 100 years.

The classifieds have gone digital and the plant, which seemed so cutting
edge a decade ago – so technologically revolutionary – is now a symbol
of a bygone time. There are some people who are now saying that they
always thought the plant was a bad idea because they knew big
classified-stuffed newspapers had no future, but I can’t recall them
being all that vocal at the time.

Who could really foresee a decade ago that the digital revolution would
sweep away what had been – and still was in 2003 – among the most
profitable industries in Australia? The digital revolution, which is
really just beginning, did not just destroy the business model for
newspapers. It destroyed a whole branch of manufacturing and with it
went the jobs – and small businesses – of thousands of people.

Journalists are very well exercised about the future of journalism and
it’s true that thousands of jobs in journalism have gone in the past few
years. But no one is saying that journalism has no future in the digital
age, though it is entirely unclear what that future will be like.

The jobs that have gone in newspaper manufacturing are gone forever.
There is no future for the hundreds of printers who have lost their jobs
across the country. Those who remain – well, the best that can be said
is that they may remain employed a little longer if newspaper companies
make the right decisions about the sort of print newspaper that might
survive another decade or so.

The newsagencies that have closed, their owners out of business, will
never return. The days when every shopping strip had a newsagent are
over. The thousands of truckies who deliver newspapers to the newsagents
from the printing plants, they are on borrowed time. Their jobs too will
shortly disappear.

All this is happening in book publishing as well – jobs lost forever and
small businesses in the form of bookshops closing – and more or less the
same thing is happening in the recording industry. There’s a process of
deindustrialisation going on which is irreversible and will most
probably gather speed. It is going on in every industry and in every
business. The effects have been profound and will become more so over time.

It’s in that context that the future of car manufacturing in Australia
should be considered. That and the issue raised by Alan Kohler in his
column (Terminating Jobs: the rise of the machines, December 4).
Digitalisation and automation, including stunning developments in
robotics, are rendering labour increasingly expensive and increasingly
redundant.

It may well be that there is no future for car manufacturing in
Australia, not just because of economy of scale issues and because
Australia can’t compete with low labour-cost manufacturing plants in
Asia. The car industry may have no future in Australia as a major
employer of labour because automation and digitalisation will eventually
mean that the manufacture and assembly of cars will require only a small
fraction of the workers currently employed in building cars.

And even the low-cost manufacturers in Asia, including China, will
inevitably face the same issue. What happens to those people who will
lose their jobs because they are no longer needed – no matter how low
wages go – to manufacture cars or newspapers or almost anything?

Those who argue that the demise of the car industry in Australia is all
down to high wages and low productivity may have a point, but it seems
to this non-economist that what increased productivity means is the
replacement of labour by the processes of automation and digitalisation.

The causes of the growing inequality in liberal democracies may be due
to many factors, but a major one must be that it is increasingly
possible in most industries – and more profitable – to employ fewer
workers and on relatively low wages than it was in the recent past.

In the United States, productivity increases based on the shedding of
jobs has meant that real wages have been falling in America for several
decades and that the fall has accelerated in the past few years (The
West is losing faith in its own future, December 10). The minimum wage
in the US is just over $7 an hour which means that tens of thousands of
American workers are living on wages that are below the poverty line.

Australia may be a few years behind the US but we are surely heading in
the same direction. The Australian Bureau of Statistics reported this
week that in the last financial year the average retirement age was
53.8. And people were retiring, according to the report, earlier than
they had intended.

What this suggests is that increasing numbers of people in their fifties
and early sixties are being forced into ‘retirement’ because there are
no jobs for them. They are victims of the revolution – and to an extent,
victims of ageism – and it could be argued that all the talk of people
having to work longer is just a lot of hot air.

Tony Abbott might be right and there may be no point in propping up the
car industry for another decade before its inevitable closure. Some
recognition though of the consequences of the revolution that we are
living through would be good.

So would a sense of how the Abbott government thinks it might mitigate
the fallout from that revolution and the fallout specifically from the
end of car manufacturing in Australia.

These are big and complex issues and so far no government anywhere – not
in the US and not in Europe – has adequately and honestly addressed the
fallout of the changes we are living through.

That’s no reason for Tony Abbott to join the list of leaders with their
heads in the sand.

(2) No Jobs - a problem for the Elite, when Populist movements smash the
Established Parties

http://www.businessspectator.com.au/article/2013/12/10/global-news/west-losing-faith-its-own-future

The West is losing faith in its own future

Gideon Rachman -

Financial Times, 10 Dec, 8:52 AM 63

What defines the West? American and European politicians like to talk
about values and institutions. But for billions of people around the
world, the crucial point is simpler and easier to grasp. The West is the
part of the world where even ordinary people live comfortably. That is
the dream that makes illegal immigrants risk their lives, trying to get
into Europe or the United States.

Yet, even though the lure of the West remains intense, the Western world
itself is losing faith in its future. Last week Barack Obama gave one of
the bleakest speeches of his presidency. In unsparing terms, the US
president chronicled the increasing inequality and declining social
mobility that, he says, “pose a fundamental threat to the American
dream, our way of life and what we stand for around the world”.

A Pew Research Center opinion survey, conducted in 39 countries this
spring, asked: “Will children in your country be better off than their
parents?” Only 33 per cent of Americans believed their children would
live better, while 62 per cent said they would live worse. Europeans
were even gloomier. Just 28 per cent of Germans, 17 per cent of Brits,
14 per cent of Italians and 9 per cent of French thought their children
would be better off than previous generations. This Western pessimism
contrasts strongly with optimism in the developing world: 82 per cent of
Chinese, 59 per cent of Indians and 65 per cent of Nigerians believe in
a more prosperous future.

It would be nice to believe that talk of a decline in Western living
standards is simply hype. But, unfortunately, the numbers suggest that
the public is onto something. According to researchers at the Brookings
Institution, the wages of working-age men in the US – adjusted for
inflation – have fallen by 19 per cent since 1970. Joe Average – once
the epitome of the American dream – has fallen back, even as gains for
the top 5 per cent of incomes have soared. Even conservative politicians
are worried. Senator Marco Rubio, a contender for the Republican
presidential nomination in 2016, points out that his parents were able
to “make it into the middle class” from relatively humble jobs, as a
bartender and a maid. These days, he acknowledges, that would no longer
be possible.

The sense of gloom and insecurity in Europe is also grounded in reality
– in particular the knowledge that welfare and retirement benefits are
likely to be less generous in future. The pressure on prosperity is most
intense in countries that have suffered worst in the debt-crisis –
places such as Greece and Portugal have seen actual cuts in wages and
pensions (The EU’s financial pinch has turned to poverty, December 9).

But living standards are even under pressure in European countries that
have done relatively well. Research by the Financial Times has shown
that Britons born in 1985 are the first cohort for 100 years not to be
experiencing better living standards than those born 10 years previously.

Even in Germany, often lauded as the most successful big economy in the
Western world, the benefits of the ‘Merkel miracle’ have been felt
mainly at the top end of the wage scale. The economic reforms that laid
the basis for Germany’s current export boom involved holding down wages,
cutting social benefits and employing many more temporary workers.

There is a connection between the rising optimism in the developing
world and the rising pessimism in the West. In his speech last week,
Obama remarked that “starting in the late 1970s, the social contract
began to unravel”. Perhaps not coincidentally, it was also in the late
1970s that China began to open up.

Even defenders of globalisation now usually acknowledge that the
emergence of a global labour force has helped hold down wages in the
West. Some European friends of mine daydream that protectionism – or
even a war in Asia – could send more well-paid jobs back to the West.
But in reality, globalisation seems unlikely ever really to go into
reverse, given the technological, economic and political forces pushing
it forwards. It would certainly be morally dubious to attempt to bolster
Western living standards by undermining an economic trend that has
dragged hundreds of millions of people out of poverty in the developing
world.

Even if the Western nations did close their markets, Western employees –
including white-collar workers – would increasingly find that many jobs
could be done cheaper by computers or robots. Indeed the march of the
robots will also soon pose a threat to assembly-line workers in China
(Terminating jobs: the rise of the machines, December 4).

If the erosion of living standards continues, how will Western voters
react? There are already signs of political radicalisation – with the
populist right on the rise in both the US and Europe. But, as yet, there
is no real sign that the Tea Party in America or nationalist movements
in Europe have a realistic shot at controlling the central government in
a large nation. The consensus around globalisation also seems to be
holding. Indeed this weekend the World Trade Organisation apparently
made a breakthrough in the search for a new global trade deal.

But while new political movements are not yet ready to smash the
established parties in the West, mainstream politicians are having to
react to the new economic climate. Rising inequality is increasing the
pressure for more redistributive taxes and higher minimum wages on both
sides of the Atlantic. Another decade of Western economic malaise – or,
God forbid, another financial crisis – is likely to see more radical
solutions and politicians emerging.

(3) Asset bubbles & Financial Crisis caused by Mercantilist economies'
"Savings Glut" - John Craig

Fixing the Debt Problem

From: John Craig <john.cpds@gmail.com> Date: 23 September 2013 20:21

to Gillian Tett (gillian.tett@ft.com)
c/- The Financial Times

Re: West's debt explosion is real story behind Fed QE dance, Financial
Times, 19/9/13 {below}

Your article suggested that Western governments' addiction to debt is
the reason behind the FED's QE program. I should like to suggest a
broader dimension that needs to be considered, namely the impact of
international financial imbalances associated with poorly developed
financial systems – especially those in East Asia's major mercantilist
economies.

Martin Wolf recently argued (We still live in Lehman's Shadow) that the
growth of debt and asset bubbles (as well as the financial crisis that
resulted from bursting of those bubbles) was a byproduct of 'savings
gluts' – especially in developing countries after the Asian financial
crisis. Where demand is suppressed to maximize savings and thus achieve
current account surpluses, trading partners necessarily have to be
willing and able to run persistent deficits and accumulate ever-growing
debts if the global economy is not to stagnate. He also argued that
maintaining those imbalances (eg via QE) was the 'least bad' option
where some countries maintain mercantilist economic strategies.

Stephen King then responded (Policy Makers have not tackled the causes
of the crisis) by pointing to the need to address the savings gluts that
are the root of the problem (and the reason for excessively loose
monetary policy). He noted that:

·  previously-large current account surpluses by Japan and China have
moderated, as has the US's previously-large deficit;

·  savings gluts still exist because the Eurozone as a whole now has a
large current account surplus;

·  much of cheap credit created through the Federal Reserve's QE found
its way to emerging economies – and created problems.

I should like to suggest for your consideration that:

·  savings gluts (which created a requirement for loose monetary policy
elsewhere) have been an essential feature of the methods used to achieve
'economic miracles' in East Asia – starting in Japan, then copied by the
'tigers' and ultimately China – because they involve the use of national
savings to maximize production by state-linked enterprises rather than
encouraging profit seeking investments by independent enterprises (see
Structural Incompatibility Puts Global Growth at Risk, 2003 and Are East
Asian Economic Models Sustainable?, 2009);

·  the benefits of 'savings gluts' were perceived by many emerging
economies following the Asian financial crisis because countries with
poorly developed financial systems who maintained large current account
surpluses (eg Japan and China) were able to avoid the distress
experienced by countries with 'crony capitalist' systems that were
reliant on foreign capital. This exacerbated the 'savings glut' problem
affecting their trading partners – and thus played a role in generating
the asset bubbles that gave rise to the global financial crisis;

·  QE by the US Federal Reserve is not simply intended to boost economic
growth – as it necessarily would have the effect of reversing the flow
of capital from 'savings glut' countries into the US, and thus creating
risks for countries using East Asian mercantilist economic methods (or
which have weak financial systems for other reasons) – see Currency War?

Some speculations about how these problems might be resolved are in
China may not have the solution, but it seems to have a problem (2010).
This involved (for example) highlighting the role that savings gluts
play, seeking reform of financial systems as well as measures (such as
those you suggested) to moderate Western government's debt appetites.

I would be interested in your response to my speculations.

Regards

John Craig
Centre for Policy and Development Systems
http://cpds.apana.org.au/index.html

(4) Debt explosion real story of Fed QE dance - Gillian Tett, Financial
Times

http://www.ft.com/cms/s/0/76b6f332-2133-11e3-8aff-00144feab7de.html

Debt explosion real story of Fed QE dance; Western finance cannot be
fixed without tackling credit addiction

West's debt explosion is real story behind Fed QE dance

By Gillian Tett

September 19, 2013 5:14 pm

Western finance cannot be fixed without tackling credit addiction

The danger with addictions is they tend to become increasingly
complusive. That might be one moral of this week's events. A few days
ago, expectations were sky-high that the Federal Reserve was about to
reduce its current $85bn monthly bond purchases. But then the Fed
blinked, partly because it is worried that markets have already
over-reacted to the mere thought of a policy shift. Faced with a choice
of curbing the addiction or providing more hits of the QE drug, in other
words, it chose the latter.In many ways this is understandable; the real
economic data is still soft. But as investors try to fathom what the Fed
will (not) do next, it is worth pondering a timely speech made recently
by former UK regulator Lord Turner. As he told Swedish economists last
week, and repeated to central bankers and economists in London this
week, the real story behind the recent dramatic financial sagas – be
that the market dance around QE or the crisis at Lehman Brothers five
years ago – is that western economies have become hooked on
ever-expanding levels of debt.

Until this situation changes it is delusional to think that anyone has
really "fixed" western finance with post-Lehman reforms, or created
truly healthy growth, Lord Turner insists. Put another way – although he
did not say so bluntly – one way to interpret this week's dance around
QE is that policy makers are continuing to prop up a financial system
that is (at best) peculiar and (at worst) unstable.

Such criticisms, of course, are not new: maverick far-right and far-left
economists have been making them for years. But what makes Lord Turner's
contribution notable is that until recently he was sitting at the centre
of the global financial system – and post-Lehman reform process – he now
thinks is so flawed. And from that perspective he points out some
curious contradictions. Take what banks do. A standard economics text
book, Lord Turner writes, claims that banks exist to "raise deposits
from savers and then make loans to borrowers" . . . and "primarily lend
to firms/entrepreneurs to fund investment projects". Thus "demand for
money is a crucial issue" in terms of growth.

But this depiction is a fiction, he says. The reason? He calculates that
today in the UK a mere 15 per cent of total financial flows actually go
into "investment projects"; the rest support existing corporate assets,
real estate or unsecured personal finance to "facilitate lifecycle
consumption smoothing".

Some non-investment finance is socially useful, Lord Turner admits; but
much is not. In real estate, for example, most credit just "funds the
purchase of already existing houses" rather than investment in new homes
(ie construction). And what is really striking about the non-investment
piece of this financial picture is that it has exploded; as a result, as
the Bank of England's Andy Haldane also pointed out in a debate in
London last week, the size of private credit, relative to GDP, has
doubled to 200 per cent in the past 50 years.

This makes a mockery of existing textbooks and official policy
assumptions. But the explosion in credit has another peculiar
implication, both Mr Haldane and Lord Turner note: since total credit
keeps rising inexorably, even as growth remains flat, the "productivity"
of money is falling, even as the propensity of the over-leveraged system
to have booms and busts, amid investor sentiment swings, has risen.

So is there any solution? Lord Turner offers a few ideas. He wants a
radical overhaul of the intellectual models that economists use
(including, presumably, those in central banks.) He also wants policy
makers to deliberately reduce credit. Thus the Basel III framework for
banks should have tough counter-cyclical capital requirements, he
argues, and regulators should reintroduce "into the policy toolkit
quantitative reserve requirements, which more directly constrain banking
multipliers and thus credit growth than do increases in capital
requirements".

Now, of course, that is not happening; on the contrary, British banks
are under political pressure to provide more mortgages, as house prices
hit new peaks, and the Fed is so determined to kickstart the US housing
market it keeps gobbling up those mortgage bonds. Of course, the
official policy line is that this is just a temporary affair: once there
is strong, sustainable growth, this will stop.

But don't bet on that soon; or not in a world where asset prices and
animal spirits are now so dependent on cheap money, and so central in
driving growth. Either way, as investors celebrate this week's QE
decision, they would do well to remember that 15 per cent estimate for
productive investment. And it would be fascinating if somebody tried to
work out what the ratio for the US economy is today. Particularly if
that calculation was to emerge from the Fed.

(5) The Failure of Free-Market Finance, by Adair Turner

http://www.project-syndicate.org/commentary/lehman-brothers-and-the-failure-of-free-market-finance-by-adair-turner

The Failure of Free-Market Finance

Adair Turner

Adair Turner, former Chairman of the United Kingdom's Financial Services
Authority, is a member of the UK's Financial Policy Committee and the
House of Lords.

Sep. 4, 2013

LONDON – Five years after the collapse of the US investment bank Lehman
Brothers, the world has still not addressed the fundamental cause of the
subsequent financial crisis – an excess of debt. And that is why
economic recovery has progressed much more slowly than anyone expected
(in some countries, it has not come at all).

Most economists, central bankers, and regulators not only failed to
foresee the crisis, but also believed that financial stability was
assured so long as inflation was low and stable. And, once the immediate
crisis had been contained, we failed to foresee how painful its
consequences would be.

Official forecasts in the spring of 2009 anticipated neither a slow
recovery nor that the initial crisis, which was essentially confined to
the United States and the United Kingdom, would soon fuel a knock-on
crisis in the eurozone. And market forces did not come close to
predicting near-zero interest rates for five years (and counting).

One reason for this lack of foresight was uncritical admiration of
financial innovation; another was the inherently flawed structure of the
eurozone. But the fundamental reason was the failure to understand that
high debt burdens, relentlessly rising for several decades – in the
private sector even more than in the public sector – were a major threat
to economic stability.

In 1960, UK household debt amounted to less than 15% of GDP; by 2008,
the ratio was over 90%. In the US, total private credit grew from around
70% of GDP in 1945 to well over 200% in 2008. As long as the debt was in
the private sector, most policymakers assumed that its impact was either
neutral or benign. Indeed, as former Bank of England Governor Mervyn
King has noted, “money, credit, and banks play no meaningful role” in
much of modern macroeconomics.

That assumption was dangerous, because debt contracts have important
implications for economic stability. They are often created in excess,
because in the upswing of economic cycles, risky loans look risk-free.
And, once created, they introduce the rigidities of default and
bankruptcy processes, with their potential for fire sales and business
disruptions.

Moreover, debt can drive cycles of over-investment, as described by
Friedrich von Hayek. The Irish and Spanish property booms are prime
examples of this. And debt can drive booms and busts in the price of
existing assets: the UK housing market over the past few decades is a
case in point.

When times are good, rising leverage can make underlying problems seem
to disappear. Indeed, subprime mortgage lending delivered illusory
wealth increases to Americans at a time when they were suffering from
stagnant or falling real wages.

But in the post-crisis downswing, accumulated debts have a powerful
depressive effect, because over-leveraged businesses and consumers cut
investment and consumption in an attempt to pay down their debts.
Japan’s lost decades after 1990 were the direct and inevitable
consequence of the excessive leverage built up in the 1980’s.

Faced with depressed private investment and consumption, rising fiscal
deficits can play a useful role, offsetting the deflationary effects.
But that simply shifts leverage to the public sector, with any reduction
in the ratio of private debt to GDP more than matched by an increase in
the public-debt ratio: witness the Irish and Spanish governments’ high
and rising debt burdens.

Private leverage levels, as much as the public-debt burden, must
therefore be treated as crucial economic variables. Ignoring them before
the crisis was a profound failure of economic science and policy, one
for which many countries’ citizens have suffered dearly.

Two questions follow. The first is how to navigate out of the current
overhang of both private and public debt. There are no easy options.
Paying down private and public debt simultaneously depresses growth.
Rapid fiscal consolidation thus can be self-defeating. But offsetting
fiscal austerity with ultra-easy monetary policies risks fueling a
resurgence of private leverage in advanced economies and already has
produced the dangerous spillover of rising leverage in emerging economies.

Both realism and imaginative policy are required. It is obvious that
Greece cannot pay back all of its debt. But it should also be obvious
that Japan will never be able to generate a primary fiscal surplus large
enough to repay its government debt in the normal sense of the word
“repay.” Some combination of debt restructuring and permanent debt
monetization (quantitative easing that is never reversed) will in some
countries be unavoidable and appropriate.

The second question is how to constrain leveraged growth in the future.
Achieving this goal requires reforms with a different focus from those
pursued so far. Fixing the “too big to fail” problem is certainly
important, but the direct taxpayer costs of bank rescues were small
change compared to the damage wreaked by the financial crisis. And a
banking system that never received a taxpayer subsidy could still
support excessive private-sector leverage.

What is required is a wide-ranging policy response that combines more
powerful countercyclical capital tools than currently planned under
Basel 3, the restoration of quantitative reserve requirements to
advanced-country central banks’ policy toolkits, and direct borrower
constraints, such as maximum loan-to-income or loan-to-value limits, in
residential and commercial real-estate lending.

These policies would amount to a rejection of the pre-crisis orthodoxy
that free markets are as valuable in finance as they are in other
economic sectors. That orthodoxy failed. If we do not address the
fundamental fact that free financial markets can generate harmful levels
of private-sector leverage, we will not have learned the most important
lesson of the 2008 crisis.

Reprinting material from this Web site without written consent from
Project Syndicate is a violation of international copyright law. To
secure permission, please contact us.

(6) We still live in Lehman's shadow, by Martin Wolf

We still live in Lehman's shadow

By Martin Wolf

Financial Times

September 17, 2013

http://www.irishtimes.com/business/economy/living-in-the-shadow-of-lehman-1.1531038

Both the past and future of our financial system remain as poisonous a
topic as they were five years ago, when Lehman Brothers failed. That is
a lesson to draw from the forced withdrawal of Lawrence Summers, former
US Treasury secretary, from the list of candidates for chair of the US
Federal Reserve. For many Democrats, Mr Summers is responsible for the
financial liberalisation that led, in their view, to the crisis of
2007-09. Indeed, the debate about the origins and aftermath of the
crisis is not over. How can it be when the exceptional policies it
caused are still with us?

The fifth anniversary of Lehman's failure is an opportunity to assess
where we have come from and where we are going. How important, for
example, was Lehman's failure? It was less significant than many
believe, for two reasons. The less important one is that a financial
crisis was on its way, anyway. The more important one is that the
financial crisis was a manifestation of overstretched balance sheets.
These impaired balance sheets are, in turn, the reason a strong recovery
has been so long in coming.

Stress indicators

This is not to argue that the decision to let Lehman fail in September
2008 was unimportant. The shock began a devastating run on markets. An
indicator of these stresses is the spread between three-month Libor (the
rate at which banks could supposedly borrow from one another without
offering any security) and the overnight indexed swap rate (the implied
central bank rate over the same period). This spread, already elevated,
started to widen on the day of Lehman's failure. It kept on widening as
the financial dominoes kept on falling in the US and Europe. The
stresses revealed in this measure of the perceived solvency of banks
peaked on October 10th.

So what happened on October 10th? The finance ministers and central bank
governors of the Group of Seven leading high-income countries, meeting
in Washington, declared that they would "take decisive action and use
all available tools to support systemically important financial
institutions and prevent their failure". The core global financial
system became the ward of the states. The idea that this was a private
system was revealed to be an illusion. Taxpayers woke up to discover
that bankers were exceptionally highly paid and out-of-control civil
servants.

Governments and central banks dealt with the global financial panic
relatively quickly and effectively, though a devastating aftershock
emerged in the eurozone in 2010. Yet eliminating panic and even
restoring the banks to health relatively quickly, as the US did, was not
enough to generate a vigorous recovery. Even in the US, which has
recovered faster than the other large crisis-hit economies, gross
domestic product has fallen consistently relative to the pre-crisis
trend. In the second quarter of 2013, it was 14 per cent below that
trend. In the UK, it was 18 per cent below trend. Since much of the
income generated in the recovery has accrued to the very top of the
income distribution (partly because of the policies employed), it is
little wonder discontent is rife.

Cause of panic

Lehman was not the only possible cause of a panic. Any one of a host of
institutions might have failed, with similarly devastating effects. The
big impact of Lehman was to make transparent the losses. That had to
happen. The reason for the subsequent economic weakness is also clear:
economies had become dependent on the debt-fuelled spending promoted by
rising property prices. The panic was itself a result of the cessation
of this demand engine. The intermediaries that had bet their prosperity
on ever-rising asset prices were in trouble. So, too, were economies
that had made exactly the same bet. So, too, were economies that had bet
on selling to these debt-fuelled economies. Should we have been
surprised by this aftermath? No. Several well-informed economists had
warned of just this dire possibility.

Why had important economies become so dependent on debt-fuelled growth?
The best answer is the one advanced by Ben Bernanke, the Fed chairman,
in 2005: the global savings glut , especially in developing countries
after the Asian crisis. There are two simple indicators of that
worsening glut: one is the real interest rate on safe securities, which
can be measured from the yield on index-linked government bonds; the
other is the global imbalances.

The simplest explanation of the outcome of this glut was that central
banks, particularly the Fed, responded to the contractionary forces
coming from the world economy with a monetary policy that worked by
promoting a domestic bubble economy. Given its mandate, it simply had to
do so. The explosive rise in gross debt was a result of the leveraging
up of both property assets and the financial sector to generate
household spending at levels sufficient to absorb potential supply
(including foreign net supply) in the economy.

Age of Oversupply

This, then, was a world of excess potential supply, as Daniel Alpert of
Westwood Capital argues in The Age of Oversupply – a fascinating new
book. It still is – indeed, even more so. Not just today, but for many
years, the central banks of Japan, the US, the UK and the eurozone –
essentially the whole high-income world – are not just offering free
money but creating vast quantities of it. Even so, economies are weak.
Upward twitches are hailed as a new dawn in economies that remain
smaller than they were before the financial panic, as in the UK. US
economic performance is better than that, but still decidedly poor.
Lehman's failure did not cause all this. Its failure was a symptom of
imbalances that did.

Worse, the one way we seem to know to restore health to our economies is
to restart the credit machine, as is now at last beginning to happen in
the US and UK. On the principle that a bad recovery is better than none,
I accept over-reliance on monetary policy as the least bad available
option. In countries suffering from foreigners' mercantilism and
domestic aversion to investment and fiscal deficits, little alternative
seems to exist. But managing that policy is really tricky. It is high
time that the White House nominated the next chair of the Fed. It needs
to be someone who understands and believes in the only policy available.

It should, of course, be Janet Yellen, the current vice-chair.

(Copyright The Financial Times Limited 2013)

(7) Wolf admits the glut still exists, but wants Asset Bubble policies
to continue

http://www.hsbcnet.com/gbm/global-insights/insights/2013/stephen-king-policy-makers-have-not-tackled-the-causes-of-the-crisis.html

Policymakers have not tackled the causes of the crisis

by Stephen King, Group Chief Economist

19 Sep 2013

In this week's Wednesday column, Martin Wolf argued that the collapse of
Lehman Brothers five years ago was merely a symptom of deep-rooted
problems in the global economy. He suggests – rightly, in my view – that
the underlying stresses stemmed from the global saving glut and
excessively loose monetary policy – itself an inevitable response to the
global savings glut.

It is odd, then, that while Mr Wolf admits the glut still exists, he
concludes that policymakers today should persist with aggressive
monetary stimulus. His "least bad" option is, however, precisely the
approach which led to the crisis in the first place. Repeating the
process could be regarded as no more than an act of folly.

The global savings glut still exists. Admittedly, the players have
changed but the broad picture is roughly the same. The once excessive
current account surpluses belonging to China and Japan have disappeared.
Similarly, the US current account deficit has declined dramatically. Yet
as some imbalances have faded, others have emerged. Thanks to austerity
policies in southern Europe, what was once only a large German current
account surplus is now a large eurozone surplus. And what were once
large emerging market surpluses and modest deficits are now small
surpluses and large deficits.

At first, those deficits could easily be funded. Emerging economies
offered better long-term growth opportunities than the stagnant West.
And, thanks to incredibly loose monetary policies in the West, the cost
of funding was remarkably low. Quantitative easing may have been
designed to lift Western economies but, as the US Federal Reserve's
decision to hold off from tapering on Wednesday suggests, the results so
far have been disappointing. QE has instead generated a "hunt for
yield", too often disregarding underlying economic fundamentals.

There has to be a much greater focus on the growing inconsistency
between low structural growth rates in the West, underdeveloped and
illiquid capital markets in the emerging world and a persistent but
ultimately malignant hunt for yield.

Some of this money went into Western financial assets, allowing Wall
Street to do well even as Main Street suffered. Much of it, however,
found its way into emerging markets. Countries like India and Brazil
ended up with widening current account deficits, rising labour costs and
unsustainable consumer booms. They began to look rather too much like
the nations of southern Europe before the onset of the eurozone crisis:
an absence of quality investment, deteriorating competitiveness and
slower growth. Too much money chasing too few returns sadly creates its
own problems.

Mr Wolf would doubtless argue that, if some nations and regions insist
on saving more than is desirable, and invest those savings mostly in
liquid assets, it is inevitable that interest rates will be lower
elsewhere. That may be true. It does not, however, make a policy.
Central bank action designed to keep the money taps on merely rubber
stamps a process that would happen, for good or bad, in any case.

Instead, policymakers need to tackle the original sin. The global
savings glut partly reflects a commonly held – but foolish – belief
that, somehow, current account surpluses are a sign of strength while
deficits only reflect serious weaknesses, an odd argument given that
surpluses and deficits are two sides of the same coin. Yet even where
imbalances have been reduced, the results have been mixed. China, after
all, managed to lower its current account surplus dramatically in recent
years but only at the cost of excessive domestic credit creation.

Mostly, however, excess savings reflect a fundamental problem: a growing
gap between financial hope and economic reality. Even before the
financial crisis, the evidence increasingly suggested that western
economies were slowing down. Relative to consensus, US economic growth
has disappointed year after year, during good times and bad. Other
countries have fared even worse. Driving up asset prices in the hope
that this structural malaise can be overcome may only sow the seeds of
future financial upheavals.

Instead, there has to be a much greater focus on the growing
inconsistency between low structural growth rates in the West,
underdeveloped and illiquid capital markets in the emerging world and a
persistent but ultimately malignant hunt for yield. The political
implications may be unappealing – higher retirement ages, tougher
regulation, lower returns, harder work – but better, surely to tackle
the underlying problems than continuously to pretend that the monetary
magic wand can solve all problems.

Stephen King originally wrote this article for the Financial Times
newspaper, published on 19 September 2013.

(8) Revelations from a Swiss banker: Bankers pay Hit Men; Bilderbergers
destroy our industry
http://web.archive.org/web/20110607203524/http://noviden.info/article_239.html
http://www.henrymakow.com/revelations_from_a_swiss_banki.html

Noviden, Russia

Startling revelations from a Swiss banking insider

(interview with a Swiss banker  done in Moscow 30.05.2011)

Q: Can you tell us something about your involvement in the Swiss banking
business?

A: I have worked for Swiss banks for many years. I was designated as one
of the top directors of one of the biggest Swiss banks. During my work I
was involved in the payment, in the direct payment in cash to a person
who killed the president of a foreign country. I was in the meeting
where it was decided to give this cash money to the killer. This gave me
dramatic headaches and troubled my conscience. It was not the only case
that was really bad but it was the worst.

  It was a payment instruction on order of a foreign secret service
written by hand giving the order to pay a certain amount to a person who
killed the top leader of a foreign country. And it was not the only
case. We received several such hand written letters coming from foreign
secret services giving the order to payout cash from secret accounts to
fund revolutions or for the killing of people. I can confirm what John
Perkins has written in his book “Confessions of an Economic Hit Man”.
There really exists just a system and Swiss banks are involved in such
cases.

  Q: Perkins book is also translated and available in Russian. Can you
tell us which bank it is and who was responsible?

  A: It was one of the top three Swiss banks at that time and it was the
president of a country in the third world. But I don’t want to give out
to many details because they will find me very easily if I say the name
of the president and the name of the bank. I will risk my life.

  Q: You can’t name any person in the bank either?

  A: No I can’t, but I can assure you this happened. We were several
persons in the meeting room. The person in charge of the physical
payment of the cash came to us and asked us if he is allowed to payout
such a big amount in cash to that person and one of the directors
explained the case and all others said ok you can do it.

  Q: Did this happened often? Was this kind of a slush fund?

  A: Yes. This was a special fund managed in a special place in the bank
were all the coded letters came in from abroad. The most important
letters were hand written. We had to decipher them and in them was the
order to pay a certain amount of cash from accounts for the
assassination of people, funding revolutions, funding strikes, funding
all sorts of parties. I know that certain people who are Bilderbergers
were involved in such orders. I mean they gave the orders to kill.

  Q: Can you tell us in what year or decade this happened?

A: I prefer not to give you the precise year but it was in the 80’s.

Q: Did you have a problem with this work?

A: Yes, a very big problem. I could not sleep for many days and after a
while I left the bank. If I give you too many details they will trace
me. Several secret services from abroad, mostly English speaking, gave
orders to fund illegal acts, even the killing of people thru Swiss
banks. We had to pay on the instructions of foreign powers for the
killing of persons who did not follow the orders of Bilderberg or the
IMF or the World Bank for example.

Q: This is a very startling revelation that you are making. Why do you
feel the urge to say this now?

A: Because Bilderberg is meeting in Switzerland. Because the world
situation is getting worse and worse. And because the biggest banks in
Switzerland are involved  in unethical activities. Most of these
operations are outside the balance sheet. It is a multiple of what is
officially declared. Its not audited and happening without any taxes.
The figures involved have a lot of zeros. Its huge amounts.

Q: So its billions?

A: Its much more, its trillions, completely unaudited, illegal and
besides the tax system. Basically it’s a robbery of everybody. I mean
most normal people are paying taxes and abiding by the laws. What is
happening here is complete against our Swiss values, like neutrality,
honesty and good faith. In the meetings I was involved in, the
discussions where completely against our democratic principles. You see,
most of the directors of Swiss banks are not locals anymore, they are
foreigners, mostly Anglo-Saxon, either American or British, they don’t
respect our neutrality, they don’t respect our values, they are against
our direct democracy, they just use the Swiss banks for their illegal means.

{what about "Jewish" - Peter M.?}

They use huge amounts of money created out of nothing and they destroy
our society and destroy the people world wide just for greed. They seek
power and destroy whole countries, like Greece, Spain, Portugal or
Ireland and Switzerland will be one of the last in line. And they use
China as working slaves. And a person like Josef Ackermann, who is a
Swiss citizen, is the top man at a German bank and he uses his power for
greed and does not respect the common people. He has quite a few legal
cases in Germany and also now in the States. He is a Bilderberger and
does not care about Switzerland or any other country.

Q: Are you saying, some of these people that you mention will be at the
up-coming Bilderberg meeting in June in St. Moritz?

A: Yes.

Q: So they are currently in a position of power?

A: Yes. They have huge amounts of money available and use it to destroy
whole countries. They destroy our industry and build it up in China. On
the other hand they opened up the gates in Europe for all Chinese
products. The working population of Europe is earning less and less. The
real aim is to destroy Europe.

Q: Do you think that the Bilderberg meeting in St. Moritz has symbolic
value? Because in 2009 they where in Greece, 2010 in Spain and look what
happened to them. Does this mean Switzerland can expect something bad?

A: Yes. Switzerland is one of the most important countries for them,
because there is so much capital here. They are meeting there because
apart from other things they want to destroy all values that Switzerland
stands for. You see it’s an obstacle for them, not being in the EU or
Euro, not totally controlled by Brussels and so on. Regarding values I
am not talking about the big Swiss banks, because they are not Swiss
anymore, most of them are lead by Americans. I am talking about the real
Swiss spirit that the common people cherish and hold up.

Sure it has symbolic value, as you said, regarding Greece and Spain.
Their aim is to be a kind of exclusive elite club that has all the power
and everybody else is impoverished and down.

Q: Do you think that the aim of Bilderberg is to create a kind of global
dictatorship, controlled by the big global corporations, were there are
no sovereign states anymore?

A: Yes and Switzerland is the only place left with direct democracy and
its in their way.  They use the blackmail of “too big to fail” as in the
case of UBS to put our country in big debt, just like they did with many
other countries. In the end maybe they want to do with Switzerland what
they did with Iceland, with all the banks and the country bankrupt.

Q: And also bring it in to the EU?

A: Of course. The EU is under the iron grip of Bilderberg.

Q: What do you think could stop this plan?

A: Well that’s the reason I speak to you. Its truth. Truth is the only
way. Put a light on this situation, expose them. They don’t like to be
in the spotlight. We have to create transparency in the banking industry
and in all levels of society.

Q: What you are saying is, there is a correct side to the Swiss banking
business and there are a few big banks that are misusing the financial
system for their illegal activities.

A: Yes. The big banks are training their staff with Anglo-Saxon values.
They are training them to be greedy and ruthless. And greed is
destroying Switzerland and everybody else. As a country we have a
majority of the most correct operating banks in the world, if you look
at the small and midsize banks. Its just the big ones who operate
globally that are a problem. They are  not Swiss anymore and don’t
consider themselves as such.

Q: Do you think it is a good thing that people are exposing Bilderberg
and showing who they really are?

  A: I think the Strauss-Kahn case is a good chance for us, because it
shows these people are corrupt, sick in their minds, so sick they are
full of vices and those vices are kept under wraps on their orders. Some
of them like Strauss-Kahn rape women, others are sado maso, or
paedophile and many are into Satanism. When you go in some banks you see
these satanistic symbols, like in the Rothschild Bank in Zurich. These
people are controlled by black-mail because of the weaknesses they have.
They have to follow orders or they will be exposed, they will be
destroyed or even killed. The reputation of Strauss-Kahn is not only
killed in the mass media, he could be killed also literally.

  Q: Since Ackermann is in the steering committee of Bilderberg, do you
think he is a big decision maker there?

  A: Yes. But there are many others, like Lagarde, wo will probably be
the next IMF head, also a member of Bilderberg, then Sarkozy and Obama.
  They have a new plan to censor the internet, because the internet is
still free. They want to control it and use terrorism or what ever as a
reason. They could even plan something horrible so that they have an excuse.

  Q: So that is your fear?

  A: Its not only a fear, I am certain of it. As I said, they gave
orders to kill, so they are capable of terrible things. If they have the
feeling they are losing control, like the uprising now in Greece and
Spain and maybe Italy will be next, then they can do another Gladio. I
was close to the Gladio network. As you know they instigated terrorism
paid by American money to control the political system in Italy and
other European countries. Regarding the murder of Aldo Moro, the payment
was done thru the same system as I told you about.

  Q: Was Ackermann part of this payment system at a Swiss bank?

  A:  (S m i l e) … you are the journalist. Look at his career and how
fast he made it to the top.

  Q: What do you think can be done to hinder them?

  A: Well there are many good books out there that explain the
background and connect the dots, like the one I mentioned by Perkins.
These people really have hit men that get paid to kill. Some of them get
their money thru Swiss banks. But not only, they have a system set up
all over the world. And to expose to the public these people that are
prepared to do anything to keep control. And I mean anything.

  Q: Thru exposure we could stop them?

  A: Yes, telling the truth. We are confronted with really ruthless
criminals, also big war criminals. Its worse then genocide. They are
ready and able to kill millions of people just to stay in power and in
control.

  Q: Can you explain from your view, why the mass media in the west is
more or less completely silent regarding Bilderberg?

  A: Because there is an agreement between them and the owners of the
media. You don’t talk about it. They buy them. Also some of the top
media figures are invited to the meetings but are told not to report
anything they see and hear.

  Q: In the structure of Bilderberg, is there an inner circle that knows
the plans and then there is the majority who just follow orders?

  A: Yes. You have the inner circle who are into Satanism and then there
are the naive or less informed people. Some people even think they are
doing something good, the outer circle.

  Q: According to exposed documents and own statements, Bilderberg
decided back in 1955 to create the EU and the Euro, so they made
important and far reaching decisions.

  A: Yes and you know that Bilderberg was founded by Prince Bernard, a
former member of the SS and Nazi party and he also worked for IG Farben,
who’s subsidiary produced Cyclone B. The other guy was the head of
Occidental Petroleum who had close relations to the communists in the
Sowjetunion. They worked both sides but really these people are fascists
who want to control everything and everybody and who gets in their way
is removed.

  Q: Is the payment system you explained outside of normal operations,
compartmentalized and in secret?

  A: In those Swiss banks the normal employees don’t know this is
happening. Its like an own secret department in the bank. As I said
these operations are outside of the balance sheet, with no supervision.
Some are situated in the same building, others are outside. They have
their own security and special area where only authorized people can enter.

  Q: How do they keep these transactions out of the international Swift
system?

  A: Well some of the Clearstream listings where true in the beginning.
They just included fake names to make people believe the whole list is
fake. You see they also make mistakes. The first list was true and you
can trace a lot of things. You see, there are people around that
discover irregularities and the truth and they tell it. Afterwards of
course there are law suits and these people are forced to shut up.

  The best way to stop them is to tell the truth, put the spot light on
them. If we don’t stop them we will end up as their slaves.

  Q: Thanks you for this interview.

Peter Odintsov

Moscow May 30th, 2011