Juggling Dynamite

Since 2008, all over the world, banks have been given constant injections of ‘free’ money from governments (taxpayers) which they then place on deposit with central banks to collect interest for doing nothing.  They have used the ‘liquidity’ to pay legal fees and fines for their ongoing illegal actions, and to speculate and drive up the cost of assets and commodities in the real economy; while enriching their executives and controlling shareholders through buybacks, dividends and bonus payments.  All the while, they are confident that they will be bailed out again by taxpayers, when the insolvency crisis resurfaces.

In return, the rest of us have taken on liability for trillions in government debt which has exploded in quantity, while we, the people, are paid zero on savings deposits and minuscule or negative yields on everything else.   As a result, individuals today need about 3 x the capital to provide the same retirement income as they could safely collect 10 years ago. In 2007, $1 million in savings deposits and government bonds, could produce about 50k a year in gross interest income with little capital risk. Today we need nearly $3 million in savings to produce that same 50K, as 5-year rates have fallen from 5% in 2007 to 1.84% today (US chart above)  –even lower in many countries.

Meanwhile, wages have stagnated and the workforce participation rates have plunged, so that it is much harder to build up savings and people are having to work well into their 70’s to make ends meet.  Those who have not changed their plans to work longer and save more, are now either consuming their capital to live, or holding ticking asset bombs in overvalued financial markets, praying to outrun their savings deficits against all odds.  And they won’t.  This will become clear as asset prices mean revert once more.

The banking cartel continues to inflict and profit from crimes against humanity. Those of us who understand what has been happening are horrified and sickened, but also wondering how this dark chapter will end once the masses realize how brazenly they have been robbed and abused.  Individuals must take steps to see the risks and govern their financial choices accordingly.  Acknowledging truth may be uncomfortable, but denial will be devastating. Realism and self-preservation for individuals must be job number one.  Financial sector propaganda is our peril.

The moment of reckoning seems to be approaching again in Europe. See this latest clarion call from Ambrose Evans-Pritchard:  Unpayable debts and an existential EU-financial crisis–are eurozone central banks still solvent?

Vast liabilities are being switched quietly from private banks and investment funds onto the shoulders of taxpayers across southern Europe. It is a variant of the tragic episode in Greece, but this time on a far larger scale, and with systemic global implications.

There has been no democratic decision by any parliament to take on these fiscal debts, rapidly approaching €1 trillion. They are the unintended side-effect of quantitative easing by the European Central Bank, which has degenerated into a conduit for capital flight from the Club Med bloc to Germany, Luxembourg, and The Netherlands.

This ‘socialisation of risk’ is happening by stealth, a mechanical effect of the ECB’s Target 2 payments system. If a political upset in France or Italy triggers an existential euro crisis over coming months, citizens from both the eurozone’s debtor and creditor countries will discover to their horror what has been done to them.

As Toronto speculators gobble up supply, some industry ‘players’ are calling on government to remove part of the Ontario Greenbelt to free up more land. This is a nightmare on pretty much every level.  (Also see:  Millennials may never get out of their parents’ homes). Supply is not the problem. Once prices mean revert, the market will be awash in sellers looking to liquidate.

“Buying based on the expectation prices will rise further is the quintessential feature of a housing bubble…Investment mania is the root cause of the escalation in house-price gains, and this appears to be the case among homeowners and investors in Toronto. This activity often creates the illusion of shortages when bubbles are inflating, even when there is evidence to the contrary of a booming housing construction industry. Once these types of housing bubbles burst and prices slump in the years that follow, complaints of shortages are rarely heard again until the next bubble begins to emerge.”  See:  Toronto’s runaway housing market heading for paralysis

As self-absorbed, myopic bankers have destroyed the global financial system, they have co-opted the public purse and urged the rest of us to buy more risk in the hopes of breaking even. What these risk sellers don’t acknowledge however, is that unlike them, we the people, will not be rescued from the fruits of reckless financial choices. When we wager our savings or take on too much debt, we individuals are left holding the loses. ‘Too little to save’, no one will bail us out.  This is why, in real life, we individuals have very low risk tolerance.  Yet the financial sector profits by prodding and bating us into harm’s way every day, in every way.  Resistance is essential, now more than ever.  We each must keep our wits and personal discipline about us.

If Goldman or GM gets into financial trouble – even with their favored lending rates – the feds bail them out. If the man in the street is unable to pay his mortgage, he loses his house.

This unfairness is at the heart of today’s economic system. It’s also the source of the discontent felt – but maybe not fully understood – by the masses and the current administration.

See:  Unleashing Wall Street, Feb 22, 2017