Central banks

  By Mystic | August 11, 2012 - 08:36 | ,

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Written by: Mystic on August 11, 2012.
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  • ModernMystic

    So NO COMMENTS YET!!!

    Are you kidding me?????

    If you don’t participate, you can’t keep up PEOPLE

  • ModernMystic

    I bust my ass every day keeping this site going and all I get is the same five people saying the same lame stuff over and over. This is the apocalypse folks; peal oil, fucking global warming, bankers printing money for themselves until nothing’s left. You can’t just sit on your hands saying ” Mystic will warn me before the military comes with jackboots” not going to happen. If you don’t participate you will be fucked. Every one of you that trolls here without commenting.

    • John_by_the_creek

      Is this oft repeated post meant to be witty in some way?  Your mother is calling from upstairs.  It’s time to leave the basement, venture into the sunlight, and change the kitty’s’ litter box.  Best see to it, or she might (mercifully) take away your internet privileges.

      • John_by_the_creek

        And feel free to delete my post as well.  The products of incestuous lust suffer from unimaginable cognitive impairments due to genetic regression.  It is not right to expect from them, the civility and maturity we take for granted, as offered by everyone else posting thoughts here.

  • Modern Mystic

    More Comments folks. You must participate

  • Willbick

    I thought UK quarterly GDP april-june was -0.7%. that’s quite a long way below the waterline no?

    • Willbick

      p.s. does MMT (sorry i dont understand it much) mean that all these ‘attempts to get the banks lending’  (e.g. ’80 billion Funding for Lending scheme’) are completely pointless? Does this mean that the likes of Mervyn King dont understand how bank lending works??! Or are they just trying to prop up the banks whilst knowing that it wont affect lending?

      • windslice

        I am certain that Merv understands how banking works. I am also fairly certain that by now he has told the schoolboys how it all functions. But there is NO way that the schoolboys can come clean and announce to the population at large that all the QE has ended up back in the Bank of England as excess reserves. I suspect that they were all hoping some recovery would have been underway by now, and so that little matter could be swept under the carpet. Now they have to call it furniture and carefully walk around it.

        Nick has already said it. As long as the peeps believe that something is being stimulated it sort of helps the level of optimism. The bigger issues will happen after the harsh reality hits. I cannot believe that the smoke and mirrors will continue to perform their magic for another five years or more.

        QE has helped the banks from having to fire sale their assets. Which has propped up the property market and stock market. It has also reduced the level of interest that the government pays on debt to a record low level.

  • Modern Mystic

    Folks

    I am not doing this for my health. Keep the comments coming

  • Bigcollapso

    I am just watching the slow motion train wreck happen, and prepping. There are a least three failure modes ready to end this thing. The best than the Central Banks can do is nurse it until all three happen at the same time. It looks to me like they are actually accomplishing that.
    I have been watching some Bernanke speeches lately, and I wonder if he is trying to build sympathy. He sure isn’t doing anything that makes sense to anyone that I listen to. There are rumors of Gold and Silver shortages, if these turn out to be real, things will get very interesting this fall.

    • http://www.richnewbold.co.uk/ Richard

      The rumors of PM shortages have been going around amongst the nutty-burgers for several years, yet nobody seems to have difficulty buying the stuff ;-)

      • windslice

        The problem is that all the paper promises of physical stuff can’t be redeemed with metal.

        But as long as they can keep the illusion going…..

        • http://www.richnewbold.co.uk/ Richard

          Where’s the problem, exactly? And what is this illusion you speak of? (or put another way, do you think the people buying gold and silver futures really want to take physical delivery?) 

          • windslice

            I don’t know whether it is a problem or not. It is too opaque for me to work out.

            The futures market originally developed out of the need of producers such as farmers. It has developed into a gambling casino.

            There are the people who own the real stuff, people who borrow and bet with leverage, people who have bits of paper believing they have a claim on the real stuff and the financial industry taking a cut on the deals.

            My feeling is that the last three parties involved are in some way extracting a rent from the owners of the real stuff. I do not find that these activities are beneficial to creating work and a healthy economy.

          • Bigcollapso

             Like any Ponzi scheme, more claims have been created that wealth can be delivered. It is just a matter of time until the brightest claim the wealth, the music stops. and there are no chairs for the masses. It is pretty simple stuff that has been repeated by crooks over and over throughout history.
            The amazing thing this time is that it is so easy to see it coming.

      • Bigcollapso

         What are nutty-burgers?

  • pw

    Hi, If we have massive central bank asset purchases that will not ultimately be balanced, then this would have the same effect of increasing base money ( non-asset (loan) backed money).

    This begs the question “how are currencies are valued and revalued”. This appears to be a seperate accounting system to the banking 5′s.

    Do we have a model/explanation which describes this?

    • http://overthepeak.com/wordpress/ Mystic

       Sorry ….. I don’t understand the question~!?

      • pw

        The 5′s model accounts for the bank tokens but how do they value a bank token in nation A. vs. nation B.

        • http://overthepeak.com/wordpress/ Mystic

           They don’t ………. That is a beauty contest.

    • CSArichardo

      I think I follow what you are saying ?   If all these countries who issue currency do such a great job of tracking it (the 5s stuff) what determines the value of a currency in terms of other currencies ?  Especially when you are trading in that currency.  You are on to something…..because for example we talk about an account at the central bank so I am assuming that it is an account say in US dollars.  Is there another clearing account in say Euros too ?

      • joebhed

        In answer to who / what determines ‘relative’ currency values – that is, vis-a-vis other currencies – since we have been off the Bretton Woods standard, the free-market in currency exchange determines the relative values.
        That’s what ForEx does 24 hours every day.
        Or was that a different question?
         

      • pw

        Times tight at the moment but I do have an item on my list ” look more in to the workings of the Fx markets”.

  • pw

    More thoughts / questions on the central bank asset purchases svp.

    What would be the effect of the state just printing money to pay its bills vs. the other scenario of central banks buying bonds on a non-redemable basis? Both produce a wad of “mystic banking tokens”

    • http://www.richnewbold.co.uk/ Richard

      The effect would be that the nutty-burgers would get their knickers in a twist and cry about it not being “fair”.

    • windslice

      The State is not allowed to simply pay its bills by printing money. That is illegal.

      Central banks buying debt and holding it forever is legal.

      Both have the same result, as the central bank can be considered as part of the government.

      They just have to follow a legal process.

      Changing the law so that governments can simply pay the bills by issuing money is impossible. The BIS, the IMF and then the financial industry would have a word directly in the ear of any politician who even remotely thought about such a thing.

      • joebhed

         Not sure why you think the government paying its Bills by printing (money-creation) would be bad.
        And its not so much illegal as out of vogue, and as such would require a legal-mechanism for doing so without destroying the economy.
        http://kucinich.house.gov/uploadedfiles/need_act_final_112th.pdf

        Greenbacks were paper money issued to pay government Bills.
        They circulated at par value with other money for over a hundred years.
        Actually, between us, the IMF is having a serious thought about these implications.
        I just heard that there will be a presentation by an IMF chap at the American Monetary Institute’s conference on modeling the Chicago Plan reforms – the FDR-era version of the Kucinich Bill.

        But,yeah, the one-percent will not like it a bit.

        • windslice

          Quite the opposite, I believe that the money creation process should belong to the government and not the private banks.

          I find it ludicrous that we are paying interest in some way to the banks on almost every money that is in existence, and that even the government has to pay interest to the banks on its deficits.

          This has ensured that the bankers are wealthy beyond belief, and given them the power to control the economy by the amount of credit they make available and the interest that they charge.

          • Joebhed

             gotcha.

    • Bigcollapso

       The main difference is that the legal right to print money is a very powerful right, and the subject of much political wrangling.
      Beyond that printing money to pay bills without creating a debt, leaves the bankers with less control. Here is why. The monetary system is an exponential system where the debt increases exponentially and the money gets to be in exponentially shorter supply. I think the number is right now about 5 * more debt than money. This must increase as a function of time or the system collapses.
      If money was printed without debt, the money could be “owned” by people. That is they could keep it and do with it what they wanted. This could potentially be very inflationary.
      With the existing system since the banks are owed 5* as much money as there is actual money their political power increases as a mathematical function of time. It increases both because there is a severe shortage of money to pay the debts, and there is a severe shortage of wealth to cover the debt. Because they get more and more political power as a function of time, they hope to be able to control hyper-inflation by sucking all of the money (because it is all theirs) in by raising interest rates if they don’t like the inflation.

  • windslice

    Regarding the latest “Funding for Lending” scheme

    http://www.bankofengland.co.uk/markets/Documents/explanatory_notefls120713.pdf 

    I have emailed the BoE asking them exactly how this is going to help. Unlike previous email, this one seems to have disappeared without trace. I’ll send it again….. Normally they have been fairly prompt in replying to other questions.

    I also asked,

    “if the BoE takes on collateral from the banks’ loan book against T-Bills, who then receives the interest from those loans?”

    If the banks lose the interest payments, which are presumably set at a commercial level, then I can’t see the attraction of paying the BoE for the facility, unless the reduction in interest rates that the banks can get by using the T-Bills as collateral against MM funding is greater.

    More smoke and mirrors.