Saturday, October 20, 2018

Photo From  The UK, France & Germany Want to Help? Really?

After World War 2 the US created a global financial infrastructure that was based on its currency, the US dollar and set up the major banks and markets of Wall Street and London to dominate international finance and the economies of nations.

At the time The US also created, along with its World War 2 allies the United Nations, whose purpose was to internationalize their Geo Political and economic agenda. Out of this came “The World Bank”. No that wasn’t a bank in which one could get a savings account or take out a home loan. The monies that went into the World Bank were confiscated from the citizens of member countries as taxes. Few of any of these citizens had any idea that their taxes were being paid to fund a “World Bank”. They didn’t even know what it was.

What it was and still is, was that after the 2nd world war most of the world, (much of it coming out of a devastating history of colonization) was under developed economically and most people were impoverished. The World Bank would “loan” money to such countries to develop. It claimed it would do this so that these countires might be able to better help themselves. Oh how kind you say?

Well sorry. The Americans, their mega banks and corporations really don’t do kind. The real nature of the World Bank was as a cats paw for Neo Colonialism. That would mean in the post war environment, re- colonizing the newly freed countries of the world as debt slaves to the mega banks and for exploitation of their resources by US- European mega corporations.

This was written in the usual tricky language as the World Bank’s goals. First of course was to reduce global poverty, (well who could oppose that?). But then it threw in its real business model. “all its decisions must be guided by a commitment to the promotion of foreign investment and international trade and to the facilitation of capital investment”.

Why foreign investment? Why can’t a nation develop internally as the US did in the 19th century? Hmmm. After World War 2 who had the money to make these “foreign investments”? And were these investments going to be made in the interests of the impoverished nation state, or the interests of rich foreign corporations?

As for the “facilitation of capital investments”, which banks were going to have the money to make capital investments, those of the poor countries begging for development loans, or the Mega Banks of Wall Street and London?

These are really tough questions that room fulls of Harvard trained economists, strained their politically limited capacities to think about. 65 years later they still haven’t come up with any answers.

While the world grumbled about the imperial nature of the World Bank and the IMF, (both controlled by guess what country?) for more than half a century after these institutions were created, no one could do anything about them. If you were a poor country and needed money, then you went down on your knees and only got it on the terms imposed by your past Imperial masters. If a government balked, well the US State Department working with the CIA and other shady institutions, had the capacity of funding, arming and training your internal enemies, (or importing mercenaries) to create a regime change favorable to itself.

This is the veritable machine in which Africa gets its resources stripped to the benefit of Transnational Mega Corporations and Banks.

Besides Washington using its global financial infrastructure to loot poor countries, Wall Street and London also use it to fix international prices for both commodities and capital. And because of its monopoly power over global finance and macro global economics, Washington would use all of this as weapons of war against countries whom they did not favor.

Washington’s favorite weapon was and is economic sanctions. If these sanctions only represented the policies of one nation, the United States this would not be so bad. But sanctions were used by the global institutions Washington created that functioned together as a virtual monopoly. The financial houses of Wall Street and London were used to speculate in ways so as to harm the economies of Washington’s enemies.

Finally last year the world found a hero. His name was the new president, (as of 2012) of China, Xi Jinping. Xi and the Chinese Communist Party reacted to Washington’s political and economic abuse of the global financial infrastructure that it created, by starting parallel institutions that hopefully would act honestly and not for economic and political imperial advantage.

Here is a graphic of the new global economic infrastructure that China is creating with the help of many other nations who have either been harmed by the American imperial system or simply want access to what will be the new competition. Pink rectangles represent the old US designed economic, political and military infrastructure. The Brown are the new Chinese led alternatives.



The new World Bank analogue is formally called the “Asian Infrastructure Investment Bank”, (AIIB). If you are a small poor country and this bank is successful, who are you going to to ask for credit, the World Bank which wants to control your political and economic institutions, hand you over to Empire’s corporations to loot your resources and enslave your people as permanent debtors to the banks of Wall Street or London, or the new AIIB which ostensibly just wants to help you develop with minimal strings attached and at a minimal profit, only so that it can protect itself from losses and continue to function?

Washington hates all of this. Soon the World Bank will either have no clients or the institution will actually have to transform itself into being honest.

But now the worst for Washington seems to have happened. The UK joined the AIIB, Washington’s arch rival. Washington appeared to be pissed off and called Prime Minister Cameron all sorts of pejoratives, like saying that he was making a “constant accommodation” to China. That is bureaucratic speak for “x&?%@*#” and other very bad words. London held its ground and now other lap dogs of Washington have joined in. France and Germany, (they go together) are going to join the AIIB as well.  And Australia and even South Korea are thinking about joining.

The supposed reason why the UK joined is that London has a lot of business on the line with Beijing and wants to encourage and grow that relationship.

But since Cameron is wholly owned by London’s banking and financial sector, he ostensibly wouldn’t have made that move if the banks hadn’t analyzed the situation and decided that the old World Bank was now effectively dead anyway. So since London financiers could no longer use it to suck the bones of the world’s poor people dry, they might as well cozy up to China as there are great profits to made in China trade as well.

But what will the role of these flunkies of Empire be in the AIIB? Will they act constructively to help poor countries break out of their cycle of poverty without trying to addict them to debts to the Wall Street- London banks? Can a tiger change its stripes?

Or perhaps all of Washington’s public theater is just that. And the Americans are more than happy to have London, Paris, Canberra, Seoul and others of its captive nations inside the AIIB, where they might function as a Trojan Horse to subvert and co- opt the new organization from the inside?

Xi is not stupid however, unlike the leaderships of most Western “leftest” parties like the Greens. He knows the ways of these Imperialists well. After all China was partitioned by them only about 125 years ago, and the Chinese have very long memories. So I expect that Beijing will structure the AIIB so that it will be very difficult for the Anglo 5 + EU Empire to play its usual games.

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After World War 2 the entire global financial structure was set up to favor the US Dollar, with Wall Street and London as its financial centers. In 1973 The Society for Worldwide Interbank Financial Telecommunication, (SWIFT) was set up in Brussels by the same powers who had created the dollar based universe. SWIFT made especially dollar based money transfers available to the nations of the world, which greatly expedited international trade.

Global dollar domination and SWIFT were supposed to be politically neutral, only there to facilitate a growing global economy. Wall Street and London were supposed to create an honest open global market place for securities, currencies and commodities.

Of course the neutrality and honesty part never happened. And why should it when together these institutions functioned as a global monopoly. When you are a monopoly you write the rules and everyone else plays by them.

After the Cold War, as the US became more and more aggressive militarily, (both overtly and covertly) all around the world, Washington did not hesitate to use this financial system as a weapon of war.

There are relatively minor institutions that derive from the power of the US dollar, (and later its sister currency the Euro) like the IMF, World Bank and many regional “development” banks, but as a whole there are three prongs to the global monopoly, financial power that emanates from Wall Street and London.

The first is the US dollar. This has been based on the world accepting it as a means of globally agreed to portable wealth. That means if you live in Argentina or Indonesia and you want to travel or buy things abroad, the currency most available to you that will be accepted everywhere is the US dollar. The latest study of this in October 2013 showed that 81% of all international business transactions were settled in dollars. 

Usually the financial press shows global dollar acceptance by its use as a reserve currency for the world’s central banks. But this is nowhere near as good of a measure of how people value the dollar, as is its use to settle business transactions.

That is because the the reserves of what central banks are allowed to hold can easily be swayed by political pressures. Tourists and business people are only concerned about politics as a potential risk for their travels, or to the transactions that what they want to accomplish. In general they will use the currency that is the most available, stable and accepted where they want to go or by those whom they want to do business with.

The second it the SWIFT system. Since its inception this system has been so successful that today most international business deals are settled through it.

The third part is Wall Street and London. They have effectively set the price of equities, debt instruments, currencies and commodities world wide.

Each of these systems have been used abusively towards the people of the world.

First the US dollar. While the world depends on it for trade, no one but the American Federal Reserve and its member banks can produce it. And the tendency of the Fed is produce dollars as needed for the American economy without thinking much of the world being effectively addicted to it, or its needs. When the Fed produces too many dollars it creates inflation globally. When not enough the world, (as is happening now) heads towards recession.

Secondly the SWIFT system. Washington has used this politically as a weapon of financial war. It first used it against Iran and then made noises about using it against Russia. If you kick a country out of the SWIFT system, then it becomes very difficult for that nation and its people to conduct international business which throws its economy into turmoil.

And finally the Wall Street, London financial institutions have used endless leverage to distort the pricing of everything that they trades. Most notably it distorts the values of commodities like oil or gold making them more expensive or more cheap than the real supply- demand balance of physical buyers would dictate.

Using this system paper players gamble and get rich while ordinary people suffer. A perfect example of that was the artificially high prices for global food supplies in 2007. The results were global hunger especially in poor countries where people typically pay 50% or more of their income for food, and that was before commodity traders drove the prices up.

Washington has also weaponized commodity trading, as it used these markets to attack the Russian Ruble as a part of Cold War 2. 

The Chinese are now creating hopefully honest alternatives to these crooked, rigged and politicized systems.

By now everyone knows that the Chinese intend to launch their currency, the Renminbi (RNB) as a international currency and promote its use for global trade side by side against the US dollar. While in the October 2013 survey the RNB was only being used in less than 9% of world trade, given how aggressively Beijing has been creating agreements to promote it, it is likely that that figure is a least at couple of percentage points higher today.

On the third part Beijing has set up its global financial center in Shanghai. It is of course still small compared to New York and London. Part of that reason however, is that the RMB has not yet really become an international currency, (at least on a par with the dollar) and that will be the main currency of use in the Shanghai center.

China has leaked today that it is going to launch its alternative to the second area of US domination and the one Washington most loves to use as a weapon of financial war, the SWIFT system. It will be called the China International Payment System (CIPS). And unlike SWIFT, CIPS will ostensibly not be monitored by the American NSA, nor will China kick nations out, (or threaten to kick them out) of the system for Geo Political reasons.

While CIPS should be up and running for ordinary users in 2016, it will still be a small embryonic system until China can make its currency widely available pretty much everywhere and get central banks and commercial banks on board all over the world, so that global purchases can easily be made and moneys transferred from one country to another with RMB on the spanking new system.

For example the initial start of CIPS will only be with 20 banks, 13 of which are Chinese with the rest being foreign subsidiary banks also within China. Compare this with the SWIFT system, which in 2010 had 9,000 financial institutions in 209 countries in which payments could be made and received.

But the numbers are a bit misleading. To create both SWIFT and CIPS, meant building a huge and complex financial infrastructure. The most important take away from today’s great news, is that the Chinese have finished theirs at least in a Beta Version and that the first test transactions on it should be ready to roll before the end of this year.

Once CIPS is fully ready, it will just mean increasing traffic on the system which will mean getting the RNB in banks world wide and getting these banks ready to open their businesses for the coming explosion of global transactions settled in RNB and on the new CIPS system.

China working with Russia and many other nations of the TRUE world’s community, is creating alternatives to ALL of the systems set up by the Americans for global imperial control and repression.  Below is a graph of the elements of this toxic Anglo 5- EU infrastructure, (Pink) that are in the process of replacement, (Brown).



Thanks to China more than any other country, the day when the Anglo 5 + EU Empire will no longer be able to strangle the world is finally in sight.

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During the Spanish Civil War the Republicans, representing the elected government were for the most part workers, peasants and intellectuals. They were fighting against Franco’s regular army, which was designed to fight with artillery on open fields, in a way that was not all that much different from how the Napoleonic wars were fought.

The rag tag poorly armed Republicans were fighting a trained and well equipped army. And because they chose to fight them on the army’s terms they were pretty easily defeated.

What was strange, is that for all of the educated intellectuals among them, none of the Republicans, (at least with power) ever thought to fight a guerrilla war, for which they would have been far better suited. They kept fighting on Franco’s terms, effectively allowing him to write the rules of engagement, and of course they lost.

As was pointed out in Part 1 of this series; “Euro Debtors Vs Bankers Left- Right Divide“,  (relative to Greek or French debt) “No matter If one returns to living in Drachmas or French Francs, the country still owes so many hundreds of billions of Euros to the banksters. What then can be done about the debt?”

When the Greek Finance Minister, Yanis Varoufakis went to meet with the other 18 finance minister of the Euro Group (the finance ministers of the Euro Zone or countries that use the Euro), he was surprised. That was because he was expecting to be meeting with 18 economists who would together be searching for a best practices solution to Greece’s debt problems.

What Varoufakis found instead was that all of the discussions were about legalities and regulations, very little was about economics. The reason for that is that none of the economists at the meeting were there to be critical, much less imaginative thinkers. They were in fact only there to fulfill the agendas of their governments, which want these economists to essentially act as bill collectors for the banks and Troika, (ECB, IMF, European Commission).  And when we talk about bill collection we are talking the language of laws and regulations, not finance or economics.

The key, just as with the Spanish Republicans and Franco was the underlying narrative. The narrative of the bankers, the politicians who serve them and the media that they control, is that they made a good faith agreement with the debtor, (in this case Greece) to give them money in exchange for a package of concessions including a time table for the return of the cash with interest and for the sale to the creditors of state owned institutions.

This narrative continues, that if the debtor, (Greece) after receiving the cash refuses to honor its contract, then it is acting unethically and its creditors have every right to seek restitution using the systems of international and national laws any way that they can. This narrative views a debtor refusing to honor its agreements, as being tantamount to a criminal act. If the debtor is a country then it should be punished.

In a conflict situation however, (as in the Spanish Civil War) sometimes you just have to change the narrative to one that is in your favor.

A far better and truer narrative is this, and it is one that is supported by the realities of markets. That is that any debt contract is strictly a civil affair, (with no moral imperatives implied) between a creditor and a lender. Creditors are not giving money away as an act of charity. It is a business for them. And if they run their business well, then it will be very profitable.

But capitalism including banking is spelled R*I*S*K. And risk is indeed quantifiable. In lending, risk is built into the interest rate that the borrower pays. If a bank is lending money to a high risk person, business or nation then they are being compensated for the risk that they are taking by the high interest rates embedded in the contracts they make. The interest rate is ALWAYS supposed to compensate a lender for the real possibility of a default.

When there is a failure because a debtor cannot pay or in fact will not pay, (which from a risk standpoint is the same thing) the fault lies with both the borrower AND the lender. That is because the lender has badly judged the will and capacity of the borrower to repay the loan. From the standpoint of real capitalism, this is every bit as much the fault of the lender as the borrower. If a lender were to make such bad loans too often, they would rightly find themselves out of business.

So when there is a contractual crisis between debtors and lenders, (as is happening now in Greece) the proper narrative, (at least for the debtors) is to reject any negotiations based on the barely enforceable laws and regulations that are part of the old agreements and/ or stem from the old narrative.

New negotiations would need to be with true economists, who working on a clean new page are seeking a best practice solution that will maximize the positions of both the people of a debtor country and the banks and Institutions whom the economists are de facto representing.

If a country like Greece is to stay in the Euro, then the finance ministers need to figure a path back to economic growth so that the people can afford to pay their debts. A good position for Yaroufakis would be that the Eurozone should simply give Greece the money it needs to get its economy functioning again, without adding any new debts. That is hardly revolutionary. if you are a good frequent customer of a bar or a restaurant, hotel chain or airlines they will typically give you their product for free as a reward for your faithful patronage. They do this not out of kindness, but because it is good business to do so.

The Euro banks and the Troika have made a lot of interest money on the Greek people, who have been very good customers for their credit businesses. If they want them to be able to avoid a hard default, (in which the country renounces, or stops paying all of its debts) then it is in their interest to help them to get the capacity to meet their obligations.

So a good start would be to repackage Greece’s $316 Billion in debts, into say a very long term, no interest bond with repayments beginning when the Greek economy recovers to say 3% per year growth rates. “80 percent of Greece’s sovereign debt now rests in the portfolio’s and budgets of the eurozone’s member states, the ECB’s and the IMF’s vaults as well as on the balance sheet of the European Stability Mechanism (ESM).” 

So while the tax payers of these countries may complain loud and long about their hard earned money going to Greece, when they vote for politicians who put their countries into the banking business, then banking rules apply. When you make a bad investment, you sometimes have take a loss. And I imagine that the most important thing for all of Greece’s creditors, would be to get their capital back. Helping to create a strong and healthy Greek economy is the best way to do that.

Then if you are say a German voter, the take away is to NEVER vote for people who will put you into the international banking business. And do vote for people who will prevent “too big to fail” banks from taking big risks and expecting you to be the insurers of last resort. If tax payers do vote for such people, when the sh*t hits the fan, (as it invariably will) if they want to know whom to blame, they need not look any further than the nearest mirror.

While obviously none of the Eurocrats, politicians and bankers are going to like the “offer” proposed here, well that is what negotiations are for.

But if we start with the narrative that when there are failed debtor- creditor issues, both are at fault, then we have the opportunity to come to a best practices solution and compromise.

If on the other hand the debtor countries fight within what amounts to their creditors narrative, in which all that matters is the quickest and most efficient form of debt collection, then like the Spanish Republicans facing Franco’s army they will be lost.

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Mario Draghi head of the European Central Bank, and flunky and chief of the Mega Banks in EU land, has just decided to create out of thin air 1.1 Trillion Euros. Ostensibly this is to “bail out” the poorer EU countries and to put money in the hands of hard pressed European consumers, but that is a lie.

For a moment think of yourself as a poor Euro country like say Greece. You are essentially broke. You naturally have an income, but much less than you used to have. A huge part of that income has to go to banks to repay your debts to them. What moneys you have left over, now barely pays for the essentials. And frequently it doesn’t even cover the health care needs of you and your family.

Your situation however deteriorates, because your employer or the government cannot afford to pay you as much as they used to, due to a failing economy. So now if you continue to pay the banks, you will fall into utter impoverishment. If you were an individual you could simply declare bankruptcy in most jurisdictions and get out from under at least some of your financial obligations. For a nation to do that they have to default on their debts.

But that is something only the countries’ leaders can do. And they are all rich people who don’t care about your miserable situation. If their country defaults it will hurt their businesses and banks. So they won’t do it and you the average citizen has to continue to pay until the pain is so great that you scream.

Now along comes a Mario Draghi. He offers you money. But what is he offering you the money for? Not to improve your terrible standard of living, but so that you can pay the banks whatever it is they ask for. And all Mario asks for in return is that you go even further into debt. That is because he is not going to give you the money, he is in fact just going to “loan” you even more.

This is what “bailing out” the Southern zone is all about. It is not in reality about bailing them out at all. It is about As Richard Wellings, Deputy Director of the Institute of Economic Affairs in London said; “the ECB program is “unlikely to help the general economy, ordinary people on the street. It’s actually going to bailout the basically bankrupt European banks.”

That is because all of this money is going directly to the banks. They will be able to put this nearly interest free money to work and make big profits on it. But the chances of them loaning it out to ordinary people is about the same as the Mega Banks in the US loaning money out to ordinary people after the 2008 banking crisis.

These banks will of course loan the money out, but only to those who will give them maximum returns at minimum risk, not necessarily European consumers.

As Peter Boockvar a top analyst said; “”I doubt even the ECB believes that this news will directly increase bank lending, it is likely all about further weakening the euro”.

And that will be good for European exports. But how good? By de facto weakening the Euro, the EU is effectively taking part in a currency war, or a race to the bottom, as to who can have the cheapest currency so that they can export the most to the rest of the world. Well everyone can’t have the cheapest currency.

The Japanese have been trying to do just that as the Yen has fallen by 33% against against the US dollar over the past 2 years. Yet their economy has gone back into recession, even though they proportionately printed and handed out even more money to the banks than Draghi did.

And in the US the Middle Class has not only, not recovered from the damage that their Central Banks money printing, (in favor of the Wall Street banks) has done to them, it is forecast that it will continue to shrink at least over the next two years.

But those who own the banks that get all of this newly printed money do well, as do those who own big exporting companies. And of course this new money drives stock prices up so that the rich who own stocks celebrate.

Stephen Schwarzman, chairman of the Blackstone Group LP, said…… the World Economic Forum in Davos, (relative to money printing in favor of the banks). “It is never too late to do the right thing.” Laurence Fink, chief executive officer of BlackRock Inc., also in Davos, chimed in. “”The market should never, as we have seen now, …….doubt Mario.”. “Investors reacted……. The Euro Stoxx 50 added 1.7 percent” in one day. So if you are a billionaire, with your money in the market you just walked away with a cool $17 million today. Thank you Mario. INDEED!

But as bad as this deal is for ordinary people, it is potentially much worse. That is because underlying all of this is an insurance racket.

Poor nations with too much debt, that they already ostensibly can’t pay, will have to increase their indebtedness.  And the same is true with the already over-indebted banks. What happens if these banks can’t pay back those debts? Well don’t worry they are “collateralized” debts. That means that before the banks can get fresh money from the ECB, they have to give as “collateral” an IOU that someone else owes to them.

But guess who these IOU’s are from? That’s right more banks in exactly the same miserable position the borrower is in, or other promises of payment from other dicey sources.

What happens if no one can repay the debts? I am glad you asked. That is what happened in the US in 2008. Then we found out who the insurer of last resort really was. The answer was the average American middle class citizen. And that has been his and her ruination.

That is what has gotten the Germans so really pissed off. Because as Southern Europe fades, their citizens will not be in a position to pick up the insurance tab if things go bad. The assumption is that it will be the Germans, Dutch, Austrians and the Finns who will pay.

Somehow all this seems like so much of the same old, same old. Poor Europe.

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In Economic Warfare 1 and 2 we learned how the Mega Banks can use highly leveraged speculations to drive prices, (especially in commodities which include currencies), up or down beyond true market fundamentals.

And we also saw how Washington can use these intentionally opaque and complex institutions to wage currency wars, which it did for the first time on a large scale against the Russian Ruble.

The first question would be can countries which are attacked use the same institutions to counterattack?

Jim Rickards the author of “Currency Wars” claims that he worked for the Pentagon in a top secret facility to “game plan” how currencies and other financial instruments might be used as weapons of war.

He came up with scenarios of how the Chinese might attack the US financial system. And there has been speculation that the Russians might also be able to attack the US financial system.

While this might be possible using Cyber Warfare, it is highly likely that by now the Pentagon has closed any vulnerabilities the system might have had, through the traditional channels of leveraged derivative speculations, used by the Mega Banks.

So outside of cyber-attacks there is not much room for counterattacks against the Washington- New York- London financial systems.

In the end all of these systems are designed of, by and for the Mega Banks, for their profits and there for can be used by Washington for aggression against whichever nation state it chooses to attack.

It is all a part of Empire’s financial system, based in its very own currency the US dollar, or its sister currency the Euro.

And while Putin may be an expert in Judo, (using the aggression of others against themselves) it is unlikely that he will get much counter-play on his adversaries home court, with their systems, their games, their rules.

This massive attack by Washington on the Russian Ruble, should be another wake up call for both Moscow, Beijing and other still independent nations as to how much work they have in front of them, if they truly intend to defend themselves in this new Cold War.

In defending themselves properly however, they just might be able to break the back of Western economic imperialism. And that would be by simply creating honest markets.

But there is much work in front of still independent nations. We know that the BRICS at least, have already begun with the easy parts. That is replacing internal revolving credit markets with their own systems independent of Visa, Master Card, American Express etc.

They have also set up alternative international financial institutions to rival the IMF and World Bank. And we know that the Chinese are seeking to make the RNB a readily convertible world reserve currency, to be used to settle international trades. And they are probably looking to back the RNB with gold.

But the RNB has not yet achieved this status. You will know when it has been achieved, because wherever you are you will be able to go to a nearby financial institution and buy RNB at market and in quantity, as easily as US dollars.

But then comes the most complex problem of all. If you are a business person in Nigeria and want to buy something from a business in India to the tune of millions of RNB, how do you do it.

Up until now the answer has been the SWIFT system, set up, of by and for Washington and its allies. And that is a system that they can cut you off from, as they did Iran at a moments notice.

And that could mean that at any time, (for international trading purposes) your new convertible RNB would be worthless.

That means a new Alternative SWIFT system needs to be created. While Russia claims to be near doing that, it is only for trade internal to that country, NOT for international trade.

In order to build such a system one would need to bring in a number of central banks, to guarantee RNB trades to and from their local banks.

And then individual financial institutions within countries would have to be on board, (to use the new system) so that buyers of goods could wire RMB to financial accounts pretty much everywhere, and that the recipients of such funds could pick them up in cash if they wish, quickly.

That is going to take a long time to build. And until it is fully up and functioning Washington can turn off international trade against anyone it chooses to as quickly as closing a faucet.

But if nothing else, this massive currency attack against Russia is a wake up call to all nations, (but particularly the BRICS) that they need to put alternative markets in place, (to the COMEX, CME, NYMEX etc.) that will discover pricing on commodities and currencies.

And given that these new markets would only exist to assure fair valuations of commodities, (based on supply and demand) they would exclude most leverage and of course naked shorting would be very illegal.

Here is an example. During the boom period peaking in 2007, oil hit almost $150/ barrel which included massive speculation. If such speculation was not allowed, perhaps the price would only have been $120/ barrel.

But as we approach a global recession today oil has fallen to $56/ barrel with massive speculation. Without speculation the price might be closer to $80.

The extra wide swings of oil, (due to speculation) adds great pain to many countries and peoples. During the upward spike, very high oil prices badly harmed poor countries who were energy poor.

An artificial trough in oil on the other hand, harms oil producing countries and can and is used for political gains against Russia, Venezuela, Iran and others.

While there will always be highs and lows in even honest markets, the fact that they will be limited both at their heights and depths by supply- demand, will also limit the pain that people will feel.

And honest markets will not be usable for currency wars.

But there is even a better side to them. That is they will de facto pressure the rigged, Mega Bank dollar based financial markets out of existence, or at least force them to become honest.

That is because if say the NYMEX quotes oil at $147/ barrel and you are a buyer, why would you buy on that market with jacked up prices from speculators, when you can buy oil on say a Shanghai exchange at $122/ barrel?

And if you are a buyer of oil and the COMEX quotes the price at $56/ Barrel, while you know the Shanghai exchange wants $80/ barrel, you will back up the truck and buy all you can from the COMEX, only to learn that, that exchange really doesn’t have much oil, that for the most part they were only selling fake paper derivatives, not oil all along.

So you will suck up whatever oil they have at the $56/ Barrel, and maybe sue them as well for non delivery of the rest, and then when the COMEX has no more oil left in stock, and no producer wants to give them any at that price when they can get $80 on the Shanghai exchange, the COMEX will have to either die or get honest.

By simply setting up honest exchanges, you will drive a knife through the heart of Empire’s corrupt financial system and break the back of the power of the Mega Banks.

And that will seriously weaken the financial system of Washington- New York and London in ways Elizabeth Warren could not have dreamed of.

And by limiting the power of the Mega Bank financial blood suckers, you will also be aiding the American people whose blood is one of their favorite feedings.

It seems like a win- win from here. But it is all going to take a lot of cooperation and a lot of work.

After this attack however on the Russian Ruble, one would think that the BRICS understand that they have no choice but to build such alternate financial systems, if the nations of the world are to remain independent of Empire’s control.

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Jim Rickards wrote the book Currency Wars in 2011. For the most part Rickards writes about global recessions, (which we are heading towards right now) and then when nations suffer from them they frequently try and devalue their currencies, making whatever it is that they produce cheaper to foreign buyers in their now “richer” currencies.

Then other nations do the same and it begins a process of competitive devaluations.

But Rickards also claims to have been hired by the Pentagon to help to model financial warfare including the use of currencies.

While the Pentagon is always looking towards defense, as it was and is against Cyber Attacks, it is also looking to make them as well, as it did in the 2009 Stuxnet attack on Iran.

Washington’s attack on the Ruble, that has not yet completely ended, represents the first major broadside of using currency as a weapon of war.

The Mega Banks as we know from part one of this series, love to use very, very highly leveraged derivatives and speculate with them. Because that is what makes them the most money.

They use many, dicey practices to do this. One of the most controversial is “naked” shorting. That is when they sell something that they do not own, but promise to buy later, should they need to.

The buyer in such a case usually puts up real money, but the person doing naked shorting puts up nothing but a promise. Now that is leverage, 100% leverage.

This can not only be done to push stocks down, but it is done on currency options as well. A Currency option (also FX, or FOREX option) is a derivative, where the value is based off an underlying instrument, which in this case is a foreign currency, where the buyer has the option, not the responsibility to buy or sell it, based on a fixed price and date.

Currency options can be used to speculate currencies up or down.

Short sellers, (people who want to help to push a currency down) can do so with a lot of leverage, meaning they don’t have to put up much money to do it.

And controversially they can take “naked currency option short positions” as well, putting up nothing at all and still drive a currency down hard. In this article Angela Merkel of Germany tries to make this practice illegal.

But as per part one in this series, that would just be in one jurisdiction. In other jurisdictions naked shorting of currency options might still be legal. The Mega Banks will play in countries where they can do as they please, and try and buy off jurisdictions where they can’t.

Even when a practice is “banned” however, one still has to look at who is enforcing compliance and what penalties are involved for non- compliance.

In the Collaborated Debt Obligation, (a derivative package with pieces of mortgages inside) melt down of 2008, a number of government agencies could have prevented it all from happening. But starting with Alan Greenspan at the Fed, they refused to do their jobs.

Who knows how much policing is actually going to go on, relative to practices of the Mega Banks that are nominally forbidden, especially where many of those charged with enforcement are past employees of Mega Banks and hope to get jobs with them in future.

And even where there is enforcement, the penalties involved may be no more than a wrist slap, a risk well worth taking for the Mega Banks in order to be able to make potentially very lucrative deals.

So the entire network of commodity trading, including currencies is like a labyrinth of tunnels and routings, some visible and some intentionally made opaque, (Dark Pools) that are designed for highly leveraged speculations.

It is using these sometimes obscure vehicles of trade that Mega Banks and other big speculators can, like a pack of hyenas attack what they believe to be a weak entity, from whom they can get their feeding.

This was done against Greek debt instruments in 2009. Investors who owned Greek debt did not like the fact that Greece seemed to be in a bad position to repay and started selling their debt paper.

The hyenas smelled blood and piled on with their highly leveraged derivative instruments.

As the value of Greek debt paper went down, because no one wanted it, the government in order to sell debt, had to raise interest rates to hopefully attract buyers.

But higher interest rates meant higher government costs, giving it less capacity to repay debts.

Wash, rinse repeat. More selling of Greek government debt and higher interest rates, into a death spiral.

This process would have thrown the country into bankruptcy. But the European Central Bank came to the rescue and “loaned” money to Greece. That stabilized the market, interest rates fell dramatically and the hyenas backed off looking for new prey.

What happened this time was that the US government was more behind the trashing of the Ruble than the speculators. That is because unlike Greece, Russia’s financial position was essentially sound.

But Washington used the channels already in place by the Mega Banks to do its dirty work.

And given the opaque relationships between Washington, The Federal Reserve Banks and the Mega Banks, (Goldman Sachs, JP Morgan, Citibank etc.), these banks probably did the operations for Washington, all fueled by the endless dollar printing machine of the Federal Reserve System.

As strong as Russia is financially, in an environment of collapsing oil prices, Moscow was not strong enough to deal with an assault on its currency of this magnitude.

That is why it is nice to have a friend in Beijing. As long term readers of Red Pills well know, neither Russia or China are alone strong enough to stand up to the aggression of Washington in this Cold War 2, that has been declared and is being prosecuted against them.

This means that effectively the two countries, for all of their historical problems are now married. Xi (President of China) cannot allow Russia to go down.

There could be nothing worse for Chinese security than a Russia dominated by Washington.

So enter the Dragon with Trillions of fresh dollars, (bullets) and it is instant back off time for the hyenas (speculators).

Washington, having a printing press could probably stay in the game, but if it did, it would blow its cover of deniability.

That is because today, if you ask anyone in Washington whether they were engaging in a currency war against Russia, they would emphatically deny it, and it is hard to prove.

But as a tsunami of money would get into the game, it becomes easier and easier for Washington’s malevolence to come out.

So, (thanks to China) it now seems, that at least for now, Washington’s attack on the Ruble is finally over. The hyenas are backing off and regrouping.

But what can be done to prevent something like this from happening again? Millions of people in Russia are going to suffer because of this attack, even if it is over for now.

And is it possible to counterattack? That will be in Economic Warfare Part 3 tomorrow.

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In the case of Russia, it is hard to know whether the crashing price of oil and the Ruble have been simply natural events, related to highly speculative markets, or have been at least to some degree manufactured by Washington as a form of economic warfare.

The key to all of this is derivatives. If I have a cow and sell it for two of your pigs, that is a direct trade of real things. But if I have a piece of paper, saying that I own a part of a herd of cows that is a derivative. It is just a piece of paper, that supposedly has something real to underlie it.

The Mega Banks LOVE debt, (leveraged) based derivatives. These banks love to layer debt derivatives with even more debt, because they are banks and make money on each new layer of debt, (leverage).

And they do it in ever and increasingly more complicated ways. The Mega Banks are tightly tied to markets like the COMEX, CME, NYMEX etc, because they are the best and biggest customers of these exchanges.

There is also an opaque relationship between Mega Banks and Central Banks, and then between central banks and the governments of countries they are supposed to serve.

All of this has led to paper derivatives of commodities, like oil, but also currencies, (which are viewed as a commodity) that are traded through different exchanges and jurisdictions in ways that are sometimes really opaque, (like “dark pools“).

All of these systems of derivatives and their exchanges are set up mostly by the Mega Banks as vehicles for them to make money. And one thing the Mega Banks love is speculation.

That is because in speculative markets, where the Mega Banks have the best intelligence, the best super computer models, the most money and friends in high places, they don’t lose often to home players who for the most part would do better playing the slots in Vegas.

But speculators, as a group tend to behave like hyenas. They look for something they perceive as weak and then pile on for the kill, each trying to rip off as much meat for himself as he can.

That is why markets always move to excess. Sometimes it seems that the excess is up and sometimes down. In reality however speculators always move a market down, even when it appears to be moving up.

For example speculators were at work in 2007 when they drove the price of oil up to nearly $150/ barrel, while they were speculating up pretty much all other commodities as well.

While it might seem like they were speculating up commodities, what they were in fact doing is speculating down the US dollar, which everyone in those days thought was in its death throws.

The different vehicles, exchanges and jurisdictions that these speculators use, are more complicated than the Collateral Debt Obligations, (CDO), that led to the financial collapse of 2008.

And those CDOs were so complicated very few people, even very sophisticated market players understood them.

So very, very, very few people are likely to know today, all of the many ways in which the Mega Banks can create highly leveraged speculations when they feel that it is in their interest to do so.

And that would be all that much harder, if governments decided to pile on, (using Mega Banks) to rig prices, (through then super leveraged and extra opaque markets) for the purpose of Economic warfare.

The only way that ordinary people can understand whether leverage is normal or abnormal, would be to look at the price action of whatever it is that one believes to be under attack.

If you click on the ten year chart in this link I think that you will find that the price of oil today is pretty much in line with past pricing, which rises or falls wildly based on whether people believe that the global economy is going into a boom or bust.

While the fall in the price of oil today has been greater than that of other commodities, when it boomed in 2007 the rise was greater as well. Oil it seems is seen as the most important commodity in boom and bust cycles.

When the rise or fall of prices is dramatic, it usually means that speculators are piling on.

But the collapse of the Ruble was a horse of a different color, one that would seem to have gone beyond the behavior of normal speculators.

Economic planners in Moscow knew well that their country had a petro based economy with 52% of its export earnings coming from oil. And they also knew well oil’s historic boom and bust cycles.

Moscow had planned for that. Before the rapid collapse of oil prices Russia had used the high oil prices of the millennial decade, to pay down her debts internationally and had over $500 billion in the Central Bank as well as a lot of gold reserves.

When a commodities go down, countries that have economies based on commodities, see their currencies fall as well. How far the currencies fall however, depends on which commodities underlie them, how dependent the country is on those commodities and how well the country has handled its economy during the good years.

Unless a country has a huge dependency on a commodity with collapsing demand and has been irresponsible in terms of its balance sheet during the good years, (like Venezuela) currencies do not decline anywhere as much as their underlying commodities because a country is more than a commodity.

As these two charts show the fall in the Ruble has essentially matched the fall of the oil price and its fall has also been far, far greater than the fall of other world currencies, (excluding the ridiculous Ukrainian Hiryvania) including Petro and other commodity currencies.

There is a tiny possibility that speculators, believing erroneously that Washington was speculating against the Ruble, joined in, in unprecedented numbers and placed extra large bets on the Rubles decline.

But that is not likely. The great likelihood is that this was the first major salvo in the coming Currency Wars, which will be an integral part of Cold War 2.

More tomorrow in Economic Warfare Part 2

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Europe is at a pivotal point, of disaster now, or kick the can down the road American style for a greater disaster later. As it stands now the EU (created of, by and for the Mega Banks) is a bridge to nowhere. In order to complete this construction, designed to bring unimaginable wealth to those who own the Mega Banks and Corporations that control the European Union, (EU), the European Central Bank, (ECB) needs to print and distribute trillions of Euros.

If the trillions of Euros are not printed and distributed the European Union, the Euro with its European Central bank  attachment, look ready to crumble into the sea.

But when the ECB prints this money it will be handing it over of course to the Euro banksters who have run their institutions into the ground and need to be bailed out by the “public”.

In “exchange” the ECB will be getting “collateral”, which it will put a fantasy valuation on, (as was done by the Fed in the US). In the case there is a failure for any of this, the only people who have enough cash wealth to cover any part of the losses of the ECB would be the Germans and they do not want to take on this liability.

Mario Draghi head of the ECB, as well as the top EU bureaucrats, International financial institutions and Wall Street have been chomping at the bit to print the money and hand it out to their banker buddies.

Because of the way the EU was constructed however Angela Merkel has her hands on the valve. She has vowed many times not to let them print, but she constantly relents allowing them to print a few billion here and there, enough to keep Europe barely afloat.

Meanwhile due to the way Central banks function as money printing machines for the rich, within Europe the poor countries have gotten poorer and the rich have gotten richer. But within each country the rich have gotten richer as well, while the poor have gotten poorer.

And that is creating economic polarization everywhere. All of the have nots, both nation states like Greece, Spain etc. are clamoring for more money printing hoping that some of that new money will come their way to help create jobs and save badly eroded public institutions.

The refusal of Merkel to allow large scale money printing and demand that each country carry its own financial weight, is called “austerity”. And the left wants to “fight” against it even though they generally support the European Union, the Euro and the ECB, the very institutions that have created all the trouble in the first place.

Even within well off countries like Germany however, the left will also want to fight against austerity, meaning that they want more money printing.

The reason for this is that the EU and Euro have not been all that kind to German workers, even if they have done better than Greek, Spanish or French workers. While Germany has done very, very well since the inception of the Euro zone and unemployment has fallen, the vast majority of the money, (just as in the US and Britain) has gone to the well to do.

Especially now that Germany too faces recession, poorer Germans don’t give a crap about taking on liability for the trillions of Euros the ECB would print. These people don’t have the money to repay such debts anyway. They just want enough to be printed so they can keep their jobs.

Meanwhile those who actually have money in Germany and have backed Merkel, are nervous that she is going to cave into international pressure and let the ECB print the trillions in their name. A new political party, Alternative for Germany (AfD) wants to get out of the Euro altogether so that Germans will not be stuck with the bill when the Euro banquette is over and no one else wants to, or can pay.

Now the AfD is hooking up with young members of Merkel’s CDU to try and isolate and pressure her should she even think of caving.

Simultaneously the German mainstream Social Democratic Party, (SPD) which has been indistinguishable from the CDU in all Euro matters, but has been mildly anti austerity, is playing footsie with the German Left and Greens, which are simply more radically anti austerity. As Germany moves towards recession Merkel looks more and more isolated.

Meanwhile in Spain, it looks like the Spanish people have had enough. A new leftest party “We Can” (Podemos), headed by a charismatic young man Pablo Iglesias and inspired by the Greek leftist Syriza party, is rocketing ahead in the polls and already has numbers well ahead of the Mega Banker controlled left “Popular Party”. Of course what “We Can” will ask for, are policies of anti- austerity.

Meanwhile Britain, more than Germany has suffered from an unequal boom that amidst widespread prosperity has left endless numbers in American style hopeless poverty. Working class Brits have seen their wage base destroyed by people flooding into the country from poorer EU countries and undocumented workers from non EU countries.

When undocumented people come from anywhere in the world to Europe they pretty much all want to go to Britain, because that is where they will be able to get jobs with minimum hassles.

Here is a great film on this subject, that was ignored commercially because flooding labor markets with cheap workers is a major policy of the Mega Banks and Corporations who control the EU and the US.

The reaction of disenfranchised working people has been to support Nigel Farage the head of the “United Kingdom Independence Party”, (UKIP) who wants Britain out of the EU.

And with elections coming next year this has pressured David Cameron to promise to cut EU immigration and give the British people a referendum on whether to leave or to stay.

But if the British are going to break EU rules and keep Romanians and Bulgarians out, where are they going to go? Not to Greece, Spain, Italy or France. There are no jobs there. Ostensibly they would go to EU countries still doing well, the biggest of which is Germany. That left Merkel furious.

So Merkel is in the middle with her hands on the money printing valve. Which way will she turn it? What do you think she will do?

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Of course its only the top 33% of Americans who will be enjoying the coming boom. The rest will be relegated to the status of the the global underclass. The reasons why these 67% of Americans will only get a few drops of trickle down can be found here, and here. It is also embedded in their political system in which they no longer as a real matter have any representation.

Even the top 33% is tricky. Today being in the top third of American wage earners does not really make you Middle Class.  A wage earner in the top 33% would earn about $40,000 per year. But even if two people worked and brought in $80,000, that would only be Middle Class in places in America where it is cheaper to live. 

The costs of health care and especially if people want to be able to pay for their children’s higher education, without them having to take out debts would mean having household incomes well over $80,000. In a 2011 study even raising a middle income American child to the age of 18, (no college) cost $226,000 in after tax dollars. Those figures are going to be considerably higher today.

Today it could well be argued that only 20% of Americans would even quality as what used to be called Middle Class. But I give the 33% figure because when we turn the chess board around and look at it from the side of the top 1% of Americans, these are the very best of days.

If you are a well off American you see yourself in a global oasis of a booming economy for as far as the eye can see.

In financial terms that is what they would call a secular, (long term) bull market in stocks and in the US dollar. And trickle down does work to some degree. It is those economic classes however closest to the wealthy which get the most of it. So over the years we can expect the Middle Class to expand beyond the 20% of today perhaps to 33%.

But even America’s poor and its endless lumpin lower middle class will benefit as the world falters. A rising tide will bring up all ships. Here is why.

As the vast majority of people understand local and global Geo Politics in mostly moralistic terms, it may seem unfair that a small entrenched American elite who are creating misery at home and war and havoc abroad should be rewarded with the very best of times.

But history does not listen much to human complaints about morality and fairness. It just flows through its own interior logic.

Obama has declared Cold War 2 against both Russia and China. Before this both countries had economic models based on cooperative relations with Empire, (The Anglo 5, Western Europe and Japan).

Now both Moscow and Beijing are having to restructure their economies away from Empire countries and those controlled by Empire (most of Eastern Europe, the Philippines, most in Latin America, and the Middle East) to growth based on their own internal economies, trade with each other and non- aligned nations.

For the Chinese and Russians this is going to be a long process of slow economic growth. And that will lead to low demand for commodities and low commodity prices. Unless the Germans green light infinite money printing from the European Central Bank, with the check being picked up in their name, the EU as it is presently set up is dead on the water.

That means a dead European economy for as far as the eye can see. The same is true for Japan but for different reasons.

The beneficiaries of all of this are the Americans, (albeit only the well healed). When Washington pulled off its Kiev caper effectively creating Cold War 2 against Russia and then put in place economic sanctions as well, it knew that Russia, (the world’s biggest oil exporter) would be selling the black gooey stuff for currencies other than the US dollar. That in effect meant an end to the Petro Dollar that was put in place 40 years ago.

So what would then give printing press dollars value?

Well how about a world that Washington is going to put into chaos? How about Sunni Power Rising, with global “terrorism” growing to proportions only dreamt of in your nightmares? How about a new war in Eastern Europe that would trigger a face off between Russia and NATO? How about a heating up to a boil of hostilities between the US and China? How about China and a nuclear Japan facing off? How about the next US president making Obama look like a pacifist?

How about war everywhere?

When money is frightened it always seeks safety and the most secure place on earth will be the US, because all of the structural collapses and wars will be happening “over there”. That is wonderful for the US dollar and great for the US stock market because money that comes to the US will need to find a place to get a return.

And then there are DRILL BITS! Well what about drill bits? I am speaking here of drill bits that the US has now, that are capable of opening up old oil wells and extracting more out of them than the Saudis or Russians can extract using the best bits available on the market today, (outside of the US) from their known oil assets.

So for example if these state of the art bits were only to be used in the US, the Americans are the new Saudis of oil. They now have well over one hundred years of it. And their drill bits are only going to get better and better.

Because of this and what is likely to be low global demand for oil, (as there will be slow global growth) the price of oil should all but collapse or more precisely drop to a level the US government wants it to be for Geo Political reasons. Low oil prices, say in the mid 40 dollar range will be a knife in the heart to Russia, Iran and Venezuela. But it will be a major benefit to China and India.

Hmmm. Who do Washington planners want to screw and who do they want to benefit?

In any case low oil prices will be a huge help to poor and lower middle class Americans, with their gas guzzling SUVs and huge highway distances between cities. For them this will be like getting a big check in the mail from Uncle Sam every time they need to fill up their cars or for the heating oil needed for their homes. Even if these people don’t own a home, all things being equal, this will constrain rental prices.

For value added businesses low oil prices, along with low commodity prices are going to mean huge profit margins. That is even more true because the American wage base is so low. And that is with a 92 million person reserve, of potential workers now out of the labor market. Should these people be forced in to looking for work, by say the Republicans cutting their government subsidies, the American wage base should if anything drop

And these lower 67% of Americans have no political representation to help to equalize wealth. Here is a chart of what has happened to the markets, (for the rich) versus those out of the labor market since Obama took office. 

And all of these corporate profits from things like robotized manufacture with embedded 3D Printing, low labor and commodity costs are going to come in an environment of very low inflation. If you are rich an owner how much better can things get?

The point is, do not expect that because the Americans are doing the wrong thing in their country and abroad, that the perpetrators are going to somehow pay for their crimes.

As I believe that the American Deep State wants a war president in 2016, they may need to conjure up a false flag to fully humiliate Obama and make him look like a weakling and a fool.

That may take the markets, (although not the dollar) for a big but temporary spin downwards.

Afterwards however the class that is giving the world war and poverty, will be back on top for as far as the eye can see.

Look towards a new age for the Americans at least from the standpoint of money and power.

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 How the Rich Stay Rich. Money For Nothing.     Photo From

The Global economy has been moving rapidly towards recession. But stock markets today are feeling a bit better because European Central Bank head Mario Draghi has decided to print up fresh money and hand it over to the the Mega Banks of Europe and likely private corporations as well.

The money is “loaned” to these institutions of the rich at chump change interest rates, so they can use it to make more money for themselves.

Draghi asked these Mega Banks very kindly if they would use this money he is handing them, to loan out to ordinary people, so as to get the Euro economy moving again.

Since the Euro Mega Banks OWN Mario Draghi however, they will do what is most profitable for them, including investing the money in Asian debt markets for a better return.

This is exactly the same thing that happened during the US banking crisis of 2008.

And what Draghi gets as “collateral” for these loans is “Asset Backed Securities”, (you may remember those from the US debt collapse of 2008 as well) and who knows exactly what “assets” back them, or what market value they have? For the most part these loans are only as good as the solvency of the banks involved.

But the expectation is that Draghi is also going to take “corporate” bonds as collateral to loan money to Euro Corporations, has really driven stock markets upward. By doing so the capacity of the ECB to remain solvent is based on the strength of, or lack of it, of these banks and corporations.

By taking these unsecured corporate bonds and “Asset Backed Securities” as collateral for fresh cash, the cost of borrowing for Europe’s Mega Banks and Corporations falls. And that is a de facto form of corporate welfare.

But when there is welfare someone pays. In this case it is the citizens of Europe who are effectively backing the contingency risk that is being taken on by Draghi in their name.

But all Euro citizens do not have an equal capacity to pay for a broken ECB. The Northern countries, whose balances sheets are in the best shape will most likely have to cover any 2008 US style banking disaster. And that for the most part means German citizens. The German people, (unlike their American counterparts) for the most part do understand the situation and are furious about it all.

In any case Europe’s coming recession can’t be solved by printing and distributing a simple few billion Euros here and there. It will take trillions. The Mega Banks and Corps in Eurolandia are positively salivating at the free money they see coming their way and global capital will be buying their stocks wanting to get in on the free money bonanza.

If the Germans allow Draghi to print up trillions in their name and distribute it to Europe’s Mega Banks and corporations, that is the virtual machine that will insure that the rich will get much richer at the expense of everyone else.

This is the same garbage as the way the US Federal Reserve works. Entitled “How the Rich Stay Rich” Money For Nothing.  Here you can get a five part series explaining it all in very simple language.


Arman Matthews