What is a "Bail-In" which is about to happen in Greece?


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The world is suffering in a sea of debt and one way for those who have lent money to failing countries is... to help themselves to the savings of the citizens who have trusted their earnings to the banks.

It usually happens over long holiday weekends such as this Easter weekend.

As I have come to understand it records are kept and monitored by such entities as the EU which has been loaning money to Greece and other countries. They track the upward slope of the amount they have loaned and also the amount of deposits in banks. If the two trend lines reach a point, that would mean there is just enough money in the banks to cover the amount which was loaned to that country.

It did happen in Cyprus where the banks held deposits of retired former KGB operatives, so most of us didn't care. But a precedent was set and now Greece is on the verge of a similar fate.

If and when that does occur then other countries will follow.

Your money residing in your trusted bank may not be safe for much longer. This phenomenon may begin in European countries which we know have been in financial crisis for some time.

Listen to this interview with James Turk, a former commercial banker, with Eric King of www.kingworldnews.com:

http://kingworldnews.com/james-turk-4-4-15/

Could it conceivably happen here?

gg

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I don't know what the national currency of Cyprus is but I doubt it's the euro and apparently those were euro deposits. Big problem right out the gate. I'm not going into the intrinsicies of the euro and countries which use it--I don't know enough anyway--but let's go to the almighty buck.

Let's say I have the equivalent of a billion bucks in my own currency, call it the "helio" and I want to turn it into a billion bucks and make it safe for me as such. I go buy those dollars with my helios on the FOREX (foreign exchange market) and put them into the Bank of America. My money is now as safe as the dollar. (I know this is too simple but we're only talking about simple.) What's the dif between my money in dollars in BoA and my euros (or dollars even) in some rinky-dink bank in Cyprus? BoA's debt to me is in dollars of the sovereign country that issues--manufactures--those dollars and that bank is effectively attached to that country. (I did not deposit euros into BoA.) Now, you want your billion dollars back and BoA doesn't have them. Never mind the FDIC limits for BoA will never say we have no money the way the bank(s) in Cyprus did. (For one thing look at the comparative sizes of the countries and the ratio of the billion dollars to the size of each economy: one is a drop of water to a huge bucket of water the other a bucket of water to whatever part or multiple of a bucket of water.) The reason it won't say it is there would be a run on the bank and its immediate collapse. BoA picks up the phone and calls Washington: we have a problem. We need a drop of water. Is that all? We don't have that drop either. Just a minute while we make that drop. There! Done! We gave you five drops so you won't call us tomorrow. Have a nice weekend.

Note that trillions of dollars and other currencies are sloshing around in foreign exchange markets and the only real threat to those markets is the massive dollar debt held by other countries and citizens in their countries for they can only beg Washington, not compel the way BoA can. (They can default.) They cannot make bucks out of thin air. The dollar has appreciated 20% in the last year against all but one significant currency. I think the Swiss frank is the exception. A lot of non-Swiss Europeans borrowed the frank and got clobbered, I think by 30%, when the Swiss stopped holding down their currency's value against the euro by massively buying euros over a several year period.

Cyprus can't make euros or dollars and no market really wants what they can make.

All US FDIC banks--that's almost all US banks--are merely extensions of the US Federal Reserve, an arm of the US government. Our monetary system is socialized as in socialism. If one of those banks fails it only means ostensible ownership changes. The depositors, especially the huge ones, will be safe. No default will be permitted. Why? That would be the Federal government giving up 95% of its power in exchange for nothing when all it has to do is push a button and make some money. It's making money 24/7 already. Why that won't soon destroy the dollar is another matter*, but it can keep doing it for years without rampant price inflation and it will. Smaller depositors might get damaged by the limits of deposit insurance, but I doubt it. If the big boys get protected the small ones will be too. On the face of it our banking system is fascist. The reality is it's socialist. Yeah, the banks have stock holders and bond holders and boards of directors and management, all that crap, and and the Fed is supposed to be some kind of special private entity, but it's all for show. That doesn't gainsay that the country is slowly going fascist. It seems inexorable. I've no idea if it is. Technology seems to be more and more empowering of hoi polloi. Could be good. Could be bad. Without much comparative technology and the rapidity of change which started with the printing presss, the Roman Empire lasted until the 15th century and the fall of Constantinople. The Egyptians did even better. The British were at it much less longer unless you mix it the United States as a de facto extension of their famous empire. The backbone of it is economic and naval and the common language and overlapping intellectual and moral cultures. It's anglo. The British tail no longer has the brains or the will to wag the American dog. Eisenhower set them straight with the Suez crisis. True, Thatcher got Bush to invade Kuwait 25 years ago. Last gasp.

--Brant

*all money--paper money--is debt: the US makes money two ways, secondary and primary--the secondary is one buck of debt to pay for deficit spending and one buck almost immediately goes into the economy--the secondary is bank reserves which just sit there until money is borrowed (created) and nobody is forced to borrow as in pushing on a string, but when private business and people want to borrow the bank can use its reserves to make money at up to a ratio of, say, one buck of reserves to eight bucks lent--such are the blessings of fractional reserve banking--and this creates monetary velocity that overwhelms the current deflationary impulses and people lose more and more faith in the hotter and hotter dollar and exchange it for more and more assets and we get asset inflation (while in the meantime we can all party) and this will likely take years before the tipping point for there is a lot of ruin in this economy--we ain't Zimbaubwe

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The official currency of Cyprus is the euro.

But can't make them. The euro will be gone long before the dollar as country after country takes back its money making powers. The euro is the old German currency in disguise. Another soon to be failed attempt to conquer Europe. It didn't work with Hitler and it won't work with the euro. But at least 70 million people won't die. The euro will end when it no longer is worth it to Germany. That's not today and not tomorrow. That's The Day After Tomorrow.

--Brant

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Brant,

You said, "All US FDIC banks--that's almost all US banks--are merely extensions of the US Federal Reserve, an arm of the US government."

That is not my understanding. I thought that JP Morgan and friends wrote the Federal Reserve Act of 1913 which granted sole authority to a private banking cartel to create the Federal Reserve Note.

That is not constitutional as you might discover by reading Article 1 Section 10

gg

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That is not my understanding. I thought that JP Morgan and friends wrote the Federal Reserve Act of 1913 which granted sole authority to a private banking cartel to create the Federal Reserve Note.

Federal Reserve Notes are printed only by the United States Bureau of Engraving and Printing (Wikipedia). Private banks can extent credit which can be used to acquire already printed Federal Reserve Notes.

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Galt, what else is lawful but unconstitutional? The Constitution itself has become a working fiction. I wasn't talking about in-your-face de jure in any case, but working de facto. Who, for instance, appointed Yellen? Was she hired because of some stockholder revolt? Who confirmed her as head of the Fed?

--Brant

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That is not my understanding. I thought that JP Morgan and friends wrote the Federal Reserve Act of 1913 which granted sole authority to a private banking cartel to create the Federal Reserve Note.

Federal Reserve Notes are printed only by the United States Bureau of Engraving and Printing (Wikipedia). Private banks can extent credit which can be used to acquire already printed Federal Reserve Notes.

I think this is technically correct, but too simple for the discussion. Money that's literally printed is used in day to day transactions and a some of it ends up abroad eventually. Most "printed" money is made electronically and the bank already has the necessary electronic reserves for lending. When a bank writes a 200,000 dollar mortgage that's all electronic and most of it is distributed electronically. All debit and credit card transactions are electronic unless you take cash out of an ATM or from a teller or get cash back when, say, buying groceries.

--Brant

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...Who, for instance, appointed Yellen? ...Who confirmed her as head of the Fed?

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As stipulated by the Banking Act of 1935, the President appoints the seven members of the Board of Governors; they must then be confirmed by the Senate and serve for 14 years only.[6] Once appointed, Governors may not be removed from office for their policy opinions.[citation needed]

The nominees for chair and vice-chair may be chosen by the President from among the sitting Governors for four-year terms; these appointments are also subject to Senate confirmation.[7] By law, the chair reports twice a year to Congress on the Federal Reserve's monetary policy objectives. He or she also testifies before Congress on numerous other issues and meets periodically with the Treasury Secretary.

Not sure about that "may" without checking the statute.

A...

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Despite the details mentioned, which I consider a distraction, the point remains that there is no authorization in the Constitution for there to be a central bank whether it is privately owned or as a branch of the government.

I realize that there are a host of other things the government does which are also not explicitly authorized among the enumerated powers in Article 1 Section 8. For example a retirement function, a disability function, a health insurance function, an art function, an education function, a research function among others.

I suggest that that is how come the country is bankrupt. I gather it has to borrow close to fifty cents in order to spend a "dollar".

Incidentally, what passes for dollars is not Constitutional money, which would be only gold and silver coins. See Coinage Act of 1792 first paragraph.

My concern is that the actual debt is underreported since they don't count the unfunded promises and liabilities which are in the 200 trillion plus range.

Either taxes will have to be raised substantially and or spending would have to be cut to the bone or else default would happen with a prolonged depression.

A book by Timberlake entitled: Constitutional Money: A Review of Supreme Court Monetary Decisions shows how nine Supreme Court decisions have turned the Constitution on its head meaning that the result of those decisions yields just the opposite of what the Founders intended when it comes to money.

gg

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It is impossible for the US to go bankrupt if it's debt is in dollars. It can manufacture them at will.

It doesn't owe euros or yen. It owes dollars.

Aside from formal bankruptcy there is the de facto bankruptcy of inflation. Qua price inflation we are not there yet, not really. It can also be defined into and out of existence. For instance, an increase in the money supply or amount of monetary velocity. Along with all this we get moral deflation. Right now. Right here. In River City. Something for nothing and the cash for free--not!

--Brant

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Actually the US Treasury prints up Treasury Bills, Bonds and Notes which it auctions off to willing buyers which might be foreign governments, mutual funds, or individuals who then pay for say the Bonds in dollars and are owed a return of their investment plus interest. The interest these days is around 2% which is hardly enticing for the purchaser.

On the other hand the total interest on the sum total of all those Treasury Bonds has to be paid and is referred to as the debt service. Consequently the lower the interest rate the easier on the budget, which is probably the main reason the Federal Reserve or Ms Yellen keeps the interest rate at one quarter of one percent for years now. It still costs because the balance is over 18 trillion dollars. One percent would be 180 Billion so one quarter is 45 Billion.

If the rates set by Yellen were allowed to go to a more normal rate that would just cost so much more each year in the budget. If there were signs of asset inflation then the rate might have to be much higher and so much more costly. Anyone notice how the Federal Budget has been growing astronomically recently?

Printing more money to avoid bankruptcy could or would just cause a hyperinflation which would be devastating especially in the midst of a Depression.

Did you notice that the actual unemployment number is not the official 5.6% because those who have exhausted their unemployment benefits are no longer counted nor are those who have stopped looking for work, and half of those 120,000 who found jobs were actually second jobs!

Shadowstats.com reveals the true unemployment number is more like 23% already. GDP growth is also anemic because of all the government regulations and interventions under the present administration. The purchasing power of the dollar keeps going down as more dollars are authorized by the Fed to be printed by the US Bureau of Engraving and Printing. Its all paper and ink with no gold or silver to back it up!

Have I mentioned that the government has the power to manipulate the gold market thanks to FDR's Gold Reserve Act of 1934 and its 1970 amendment authorized government manipulation of all other markets as well. Fascism anyone?

Here is a link to an interview on King World News with Chris Powell who discusses the secret trading in the futures markets in the US which is authorized by law: Less than ten minutes.

I wonder if the Institute For Justice would have the courage and expertise to challenge the manipulations or whether the GOP would submit legislation to repeal the empowering laws so we would have markets again!

I can imagine that if the GOP did so, that the President would think twice before casting a veto!

Maybe Rand Paul as Senator would be interested in knowing about this.

http://kingworldnews.com/chris-powell-3-1-15/

gg

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Price suppression of gold merely means a bargain now for those who take actual possession. Why gold bugs complain is way beyond rational understanding.

Most financial instruments are manufactured and held in electronic form, including the money you put into the bank not in a safe deposit box. Unlike a true physical asset, if they were wiped out billionaires would be pauperized along with almost everyone else.

--Brant

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Interesting site Gulch:

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Using just one of the parameters the "workforce participation rate," or, the "U6" number:

 

 

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It's making money 24/7 already. Why that won't soon destroy the dollar is another matter*, but it can keep doing it for years without rampant price inflation and it will.

Yes.

Those who "invest" in US debt are actually "investing" in the unique power of the government to create money. This is why the rubber band has been able to be stretched so long...

...just because it can be stretched.

My total layman non economic prediction is the next reckoning will be this year 2015, just as it was in the 7 year cycles of 2008, and 2001. And for me personally, this one will be just as much of a non-event as was 2001 and 2008.

When you're already on solid ground... there's no where to fall. :smile:

Greg

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To whom it may concern,

David Stockman is interviewed on kingworldnews.com and believes that the limit has been reached in 2015. There is an audio interview to click on at the end of the written intro. His contribution is entitled David Stockman-Yes, Western Goverment's Do Plan To Steal Money As The Financial System Collapses

I think it is just a matter of time. Not a question of if rather of when.

I suppose removing one's savings, if you have any sitting in a bank, would reduce that risk of government theft, but you still have to store it and that might subject it to other forms of theft.

So it is not confiscation of your gold bars and silver coins to worry about rather expropriation of your bank accounts.

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Yes, Western Goverment's Do Plan To Steal Money As The Financial System Collapses.

They can only steal from their own kind...

Only the Creditist system can collapse because it's based on the illusion that credit is capital, when in reality credit is only a lack of capital.

In contrast, the Capitalist system is based upon the market value of useful goods and services rather than on the cost of borrowing money to buy them.

So only to the extent that an individual has exposure to and involvement in that thoroughly corrupted economic sector, can they be affected by its collapse.

Only suckers get fleeced.

Greg

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If you borrow you either borrow from capital stock or credit stock. The government provides the credit stock with phony money created at will. It's hard to determine the ratio between these two sources. By driving down interest rates so much the government robs from the capital stock. It also does that with taxation. These constitute worsening, fulminating trends as the credit stock expands and the capital stock contracts. Low interest rates also vitiate the caution of borrowing money for it seems so cheap causing economic distortions through businesses and their activity that can't be sustained when the credit drys up. If will eventually dry up. Here and there, then everywhere.

--Brant

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If you borrow you either borrow from capital stock or credit stock...

I never borrow... not on vehicles, not on land, not in business, not on homes. That's now to never get fleeced.

As far as I'm concerned, the Federal Reserve, the international bankers, the finance industry, and Wall street can all go f**k themselves...

...because I don't need their dope. :wink:

Greg

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There is a role for credit, especially in business, but it must be used as little as possible with due calculation and rational consideration. Unfortunately, credit markets are so distorted they've become completely toxic except for companies--mega corporations--so flushed with cash they can borrow billions for short term usually tax reasons with no trouble whatsoever. Apple computer, for instance, is one pig at this trough.

--Brant

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There is a role for credit, especially in business...

Not in my business. There is no need for credit when you can turn a decent profit and live within your means.

But just to be clear, I have nothing against other businesses needing to use credit because they can't afford to operate from a position of solvency. That's their own free choice.

Understand that 2001, 2008 and 2015 are simply the just and deserved consequences of operating on an insolvent basis. The ability to service debt does not mean that a business is solvent. Creditists believe that lie... but then they also believe that credit is capital... and that is exactly what makes them suckers.

Falling is just like flying... until you hit the ground. :wink:

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