"It Is High Time That Central Banking Is Recognized For The Disease It Is"

Tyler Durden's picture

Submitted by Pater Tenebrarum of Acting-man blog,

Hans-Werner Sinn On The ECB And TARGET-2

Winners and Losers

In a recent editorial at German newspaper Frankfurter Allgemeine Zeitung (FAZ), Hans-Werner Sinn, president of Germany's IFO Institute and a prominent critic of the ECB and the euro area bailouts, revisits the topic of the euro-systems payment imbalances that are expressed in TARGET-2 claims and liabilities. The reason why Sinn felt compelled to write this editorial is that another economist, Marcel Fratzscher of the DIW in Berlin (another economic research institute), recently asserted that 'Germany is the big winner' in the events surrounding the TARGET system.

The main reason why there is even a debate over the euro-system's payment procedures is in fact that Sinn pointed out two years ago that the system was abused as a 'stealth bailout' mechanism for the euro area periphery and that Germany was exposed to huge risks because of it.

This provoked angry reactions from courtier economists and even the Bundesbank, who tried in vain to put the genie back into the bottle by arguing that it all didn't matter. It was merely an accounting artifact, and no further implications were to be inferred. Naturally, even people who don't understand how exactly the system works were compelled to ask: if it 'doesn't matter', then why does the chart look like this?




TARGET-2 imbalances in the euro-system – click to enlarge.


In view of this chart, which had begun to depict vast and growing imbalances precisely since the beginning of the crisis period, the argument that it 'didn't means anything' and entailed no risks for anyone just didn't sound very credible. People also wondered why a prominent economist like Sinn would risk his reputation by opposing this consensus view dispensed from on high.


What Was Financed?

To begin with, Sinn was perfectly correct. He has not once misrepresented the risks posed by the system. Curiously, even Fratzscher admits in his editorial that yes, it is indeed a stealth bailout. He argues however that the potential costs are outweighed by the benefits, since in his opinion, the imbalances mostly reflect 'capital flight by German investors from the periphery', which the TARGET system enabled. Moreover, he argues that it is a good thing that credit that was previously extended by private investors is now de facto extended by the central bank, as it keeps all sorts of companies in the periphery in business. These would have been cut off from credit otherwise.

Sinn counters that first of all, it cannot be determined with certainty just whose capital flight was financed. The TARGET balances themselves cannot tell us anything about that. Sinn points out, that 'in effect, the North's printing press was lent to the South' and notes that this fact – and the attendant risks for the holders of TARGET claims – is obviously no longer in contention. The only bone of contention is 'just what was financed with it'.

Sinn concedes that German capital flight was in part financed by the TARGET system, but notes that the DIW calculations (which are actually based on IFO's numbers) are wrong. For one thing, DIW confuses gross with net amounts, as there were flows in the opposite direction as well. In fact, from 2008 to 2012, Germany has altogether exported a net €170 billion in capital! Instead of €400 billion as assumed by DIW, Sinn contends that at most €200 billion were recalled by German investors from the periphery. And even so, argues Sinn, it was not the business of the central bank to protect German banks:


“[Capital flight] does not explain the build-up of Germany's TARGET claims, and even if it did, it wouldn't have been the ECB's job to protect German banks and financial institutions from losses. Such fiscal aid measures are the responsibility of finance ministers, and not the ECB board.”


Sinn then explains that TARGET was for the most part used as a kind of vendor financing system – Germany's export surplus was partly financed by the TARGET system, partly by Germany's private sector capital exports and partly by aid packages granted in the course of the bailout. In short, it is mainly Germany's trade surplus that is reflected in the BuBa's TARGET claims. He argues furthermore that there are a number of complex business structures at work, and the TARGET liabilities of the crisis countries cannot be fully explained by the balance of payment deficits of these countries. He notes that in some countries like Portugal and Greece, TARGET liabilities and current account deficits are very closely linked, while in others like Spain and Italy, capital flight is the main factor. However, it is not necessarily capital flight to Germany. Other foreign investors such as British investors were enabled to recall their investments due to the TARGET mechanism as well (for instance, there may be a circular flow such as this one: UK investors remove capital from the EU periphery, then lend money to US buyers of cars, who in turn use the funds to import cars from Germany).


Perpetuating Imbalances and Robbing Savers

Sinn then points out that the ECB, via its lowering of credit rating standards for  central bank refinancing, enabled the national central banks in the periphery to undercut capital markets. Much higher interest rates were demanded in the capital markets, reflecting the higher risks in the crisis countries.

The conditions offered by the ECB in terms of refinancing were such that banks in the still healthy countries could no longer compete with it. In short, the ECB has driven away private sector competition in the capital markets of the periphery. This has contributed to the further fragmentation of European capital markets, since without the lure of higher interest rates, private investors have no good reason to take the risk of investing in the crisis countries. Higher interest rates would however have forced these countries to save more and enact sweeping structural reforms of their labor markets and government finances, which would ultimately have made them more competitive and lowered their ingrained balance of payment deficits. Sinn points out that most of the crisis countries are still far from having regained competitiveness, which can be largely deemed an unintended consequence of the ECB's interventions.

Since private capital markets have been undercut via the printing press, Germany's banks and insurers are no longer able to earn interest rates that adequately reflect risk. Insurers have been forced to recall the return guarantees that have traditionally extended to their policyholders.

Sinn stresses that the advantages accruing to German debtors via low interest rates must be seen in the context of the fact that Germany is actually a net creditor to the world, not a debtor. Creditors are losing out when interest rates are artificially lowered. It is as though “the ECB were acting as a purchasing agent of German savings, which it then services and distributes to the crisis countries at whatever conditions it deems appropriate”. Sinn estimates that the crisis countries have enjoyed €205 billion in interest savings due to the ECB's interventions, interest that exporters of capital such as Germany would otherwise have earned.

Sinn concludes that “it is not entirely wrong in this context to talk about the expropriation of German savers by means of low interest competition via the printing press.”

Indeed, central banks are ultimately robbing savers everywhere these days. The prudent are forced to pay for the mistakes of those who have been irresponsible and have squandered their capital.


Are Lower TAREGT Imbalances A Sign of Improvement?

Over the past few years, investors have rearranged their portfolios, causing among other things a construction boom in Germany. Meanwhile, the EU and the ECB have organized a giant flow of public funds into the crisis countries to replace private capital flows. All of this will only perpetuate the misallocation of saved capital. Capital will continue to be consumed.

Sinn then points out that Germany and other Northern countries have been regularly outvoted at the ECB board since May of 2010. In his opinion, the ECB board's actions are in conflict with article 125 of the EU treaty, as they have created a giant volume of public credit and public guarantees in favor of the Southern countries, which could eventually get the ECB itself into trouble. In a worst case scenario, the write-offs may well exceed the ECB's capital of €500 billion.

Even though the central bank could continue to function even if its capital base were  wiped out, it would be a devastating signal to the capital markets if part or all of its capital were lost. We agree with this assessment, for one thing because write-offs of a part of a central bank's assets mean that its flexibility with regard to lowering the extant money supply is curtailed. Secondly, in the minds of investors and users of the euro, it would look as though some of the 'backing' of the central bank's liabilities was gone. Although fiat money is irredeemable anyway, this would likely have a psychological impact that could severely damage the euro.

The most interesting part of Sinn's editorial however concerns the recent decline in the TAREGT-2 imbalances (see the chart above). This will probably be regarded as controversial and we expect it will ignite further debate. Sinn writes:


“If one adds up the purchases of government bonds by the central banks of the still healthy countries in the euro area and the TARGET credits in favor of the six crisis countries (Greece, Ireland, Portugal, Spain, Italy and Cyprus) for which the ECB board is responsible and deducts the claims of the crisis countries arising from a slightly under-proportional issuance of banknotes, then one gets a total of € 747 billion in ECB financed rescue loans. That is about two times the sum of the already granted fiscal rescue measures of the community of € 385 billion, for which the national parliaments are responsible.


The loans of the community are economically indistinguishable from ECB credit, but they arrived on the scene much later and are basically follow-on loans designed to relieve the ECB. In view of the advance payments made by the ECB, parliaments are essentially forced to push through a fiscal rescue architecture in the form of the European Stability Mechanism ESM and other measures, since if they were to deny the ECB such follow-up financing, the entire euro-system may well collapse. The strong insistence on a recapitalization of banks with ESM funds, which ECB president Draghi has recently expressed in a letter to the EU commission, is also explained by his panic-like fear of the ECB's own losses.


Since the TARGET liabilities of the crisis countries have been a great deal higher at one point than the € 681 billion remaining today, some observers feel that there is no longer cause for alarm. They have perhaps not yet understood that the fiscal rescue loans extended by the community replace the TARGET liabilities of the crisis countries directly and fully. This is an automatic process resulting from the TARGET system's very nature. Without the fiscal rescue measures on the part of the community, the TARGET liabilities of the crisis countries would ceteris paribus not be at € 681 billion today, but at € 1,066 billion.


In the construction of the rescue architecture, Europe's parliaments are confronted with decisions without alternatives, which have been prepared years ago already by the ECB board. They have been degraded to rubber-stamping agents. To me it is questionable whether the fiscal regional policy that has been decided behind closed doors by the ECB and for which there are no parallels in the US Federal Reserve system, is still compatible with the rules of parliamentary democracy and the German constitution”


Obviously, Sinn isn't prepared to shut up and let them get away with this unchallenged.



The notion that the euro area crisis is over has recently been heavily propagated  by EU politicians and the mainstream media. However, it is way too early for such victory laps. The fat lady is still waiting in the wings.

Hans-Werner Sinn is perfectly correct in pointing out that the ECB's attempts to restore the 'monetary policy transmission mechanism' by suppressing interest rates in the periphery is going to perpetuate capital malinvestment and delay the necessary reforms. He is also correct when he states that these interventions have actually scared private capital away, as investors require adequate compensation for the risks they are taking. Meanwhile, savers are ultimately paying for this ongoing waste of scarce capital.

It is high time that central banking is recognized for the disease it is. Without central banks aiding and abetting credit expansion, this situation would never have arisen. Even a free banking system practicing fractional reserve banking could not possibly have created such a gigantic boom-bust scenario. Money needs to be fully privatized – the State cannot be trusted with it.

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worldofdebt's picture



the misanthrope's picture

Go play your music elsewhere.

TheHound73's picture

spam, like on every thread.

NotApplicable's picture

Well, FWIW, at least he's no longer a Cramer disciple.

WordSmith2013's picture
The Central Banksters have made sure that the --->


"USA In The Throes Of A Paralyzing Economic Recession"



Hail Spode's picture

"Money needs to be fully privatized – the State cannot be trusted with it."  Amen. Sounds like something from "Localism, A Philosophy of Government".  Government should be there to enforce the implied contract of an issuer of money that they will keep the value of the money sound.  So how can the state impartially enforce that contract if they are one of the parties to it? Historically, they haven't and obviously, in the long run, they won't.  Money is too important to be left in the hands of government.  http://www.amazon.com/Localism-A-Philosophy-Government-ebook/dp/B00B0GAC... the Kindle version.

Prairie Dog's picture

"Money needs to be fully privatized – the State cannot be trusted with it."

And who can be? JPMorgan? The Hunt brothers? The Winklevoss twins?

Better a government that is subject to oversight by the people, than private manipulators. To quote Adam Smith:

"People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices."



Prairie Dog's picture

Gold and silver never been manipulated. No sirree

Hail Spode's picture

I get the sarcasm, but seriously, don't you think a governent-back fiat is what makes such vast manipulation possible?  And even then, there are limits, for example silver and gold can't drop much more or they will be below cost of production at many mines, thus initiating a corrective feed-back loop.   The dollar has lost 95% of its purchasing power over the last 100 years.  Has gold ever done that?

Prairie Dog's picture

The dollar has lost 95 percent of its purchasing power, but the economy has continued to grow and living standards are immeasurably higher than they were a century ago, despite wars and recessions. If fiat money is killing civilisation, it's taking an awful long time about it.

Oldwood's picture

You never take your livestock to market until they have maximized their yield or return on investment, so don't go thinking how fat and happy you have been feeling. If you start limping around you might well end up at the sausage factory.

No system is sustainable without the confidence of its participants and this system is getting well shat upon.

enloe creek's picture

the Em nations are soaking up the cash which would have caused inflation,
oil has drained excess money also but alot of that money is reinvested . hopefully all in twitter ,

NotApplicable's picture

Wow, that's like stupid squared, if not cubed.

I take it that cause and effect isn't your strong suit. Perhaps you should consider entering politics?

Hail Spode's picture

Fraud is an interesting crime.  For a long while, everyone can be happy, because both thieves and victims think they have the money.  Bernie Madoff's clients were happy with him for years right up until they discovered the value was gone.   The last link with the discipline of some sort of gold standard was cut in 1971 and all of our apparent economic gains since then have come from running up the national (and personal and business) credit cards.   Oh a large population of hard working smart people on a technologically unexploited continent might be expected to produce a gain in living standards- along with a GAIN, not loss, in the value of their currency.   That book, Localism, has a long analogy where the nation is compared to a corporation and dollars are shares of stock.  If the total value of the company skyrockets at the same time as the share price plummets, that company may be issusing too much stock.   And unlike companies who do a stock split, all existing currency holders don't benefit from the new issuance, just the insiders.

BigJim's picture

Technically speaking, the USD has only strictly been fiat since 1971; before that its creation was at least partially hindered by other nations being able to redeem dollars for gold... though the US ('leader of the free world') did everything in its power to persude them not to.

Take a look at what has happened since Nixon closed the gold window, and everything its detractors predicted about fiat money is coming true. Americans - and any allies whose central banks have help prop up the USD - have had a very good run; thinking this can go on forever, given the increasingly apparent strains on the system, suggests a profound lack of knowledge of monetary history.

tradebot's picture

Give it time...they are screwing it up as fast as they can...when they do, all hell will break loose

OneTinSoldier66's picture

At least Gold and Silver can't be conjured up out of thin air by firing up a printing press, or with a few keystrokes on a computer to digital crony bank accounts.


At least no one's ever manipulated unbacked, irredeemable paper fiat! Lol


There are plenty of ways nowadays to test the integrity of PM's. If anyone does manipulate or defraud with PM's, they should be held accountable. Like today’s banksters should be held accountable to the fraud they are perpetrating. Fiat is fiction which is why it's so hard to hold them accountable, because they can instantly become "richer than you". That means you're on the road to serfdom. That's is something that's a lot harder for manipulative bankers to do when hard money is used. That's why Bankers and Government hate PM's. It handcuffs them to reality. Why do you think FDR outlawed PM's as money while it was the money in use at the that very time! Don't even get me started with Tricky Dicky Richard Milhouse Nixon, pffft. One was a Democrat, the other Republican. Two sides of the same coin.


But one thing is for certain, there is no perfect world, there is no utopia where there are actually Unicorns shitting Rainbow Skittles with pot's 'o Gold at the end of the Rainbow! Fiat paper, PM's... doesn't matter, there is no utopia.


Neo wants to know, "what is The Matrix?" Unfortunately, no one can be told what the Matrix is. You have to see it for yourself.

Hail Spode's picture

"Better a government that is subject to oversight by the people, than private manipulators."  While I appreciate a good joke as much as the next Zero Hedge poster, this is a serious topic.   The key to everything the ruling class has been able to do has been its control of the money.  Private "manipulators" operate two basic ways.  One is to move in concert where geography favors them - which does not work very well with something as fungible and transferable as money; and through using the government to impose their plans.   About a quarter of that book (Localism) is how to keep monetary power de-centralized and subject to the market.

the misanthrope's picture

"better a government that is subject to oversight by the people" 

hahahahahaha.... really ? where  and when ? it had better be really local, and really small.

the government has a monopoly on money - there is no oversight.


Clowns on Acid's picture

Mars to Hans - "They don't care." The Fabian sociaists will not stop until they are stopped.

BigJim's picture

Exactly. Central banking isn't a disease; it's a racket.

max2205's picture

The State owes me and you 5 years of interest at 5%.....

NoDebt's picture

They're warming up the helicopter as we speak.  If you are standing on the roof of certain buildings in downtown Manhattan, you may be able to grab some.  On the sidewalks below, not so much.

RaceToTheBottom's picture

And the rest of the country is viewed as flyover country, and the doors of the helicopter are closed over flyover country.....

NoDebt's picture

"The fat lady is still waiting in the wings."

Her arterial sclerosis may set in before she has a chance to hit high C.

OneTinSoldier66's picture

"This provoked angry reactions from courtier economists and even the Bundesbank, who tried in vain to put the genie back into the bottle by arguing that it all didn't matter. It was merely an accounting artifact, and no further implications were to be inferred. Naturally, even people who don't understand how exactly the system works were compelled to ask: if it 'doesn't matter', then why does the chart look like this?"


It isn't true until it's been officially denied.

Aquarius's picture

I have been writing and posting on this matter for many years and am delighted that someone actually starts to see the big picture; There are many article on my website on this matter.


(seek and you shall find)

Banking is a vulgar and unnatural synthetic disease (parasitical virus) that kills its host while lifting those Bankers /Economists into the Heavens to sit by the right hand of God (until they dethrone Him); Lord Blankfein appears to see it this way as well.

Banking today (for the past ~5,000 years) is a manipulative system of theft - for the centralization of productivity and global assets to the benefit to a few major bankers with a trickle down Recursive reward system to politicians, bureaucrats and economists, et al; the blind obedient loyal.

The Banking System was designed for Fraud, is operated in Fraud, and devours the Blood of Humanity, all for a few deluded arseholes.

The future will either end in a Global Burn or We will change it. But, those in charge today, will never reform the Banking System or the players in this Game. 

Obama's TPP with NSA - through blackmail, coercion, intimidation, continuing wars and drone induced genocide, murder and destruction, etc, is designed to propagate Global Fascism and Totalitarianism for the Banking System on the whole of Humanity, and designate a total control for Cage Hunting of profits from securitized incarceration of the ~99%.

The TPP is not designed for Trade. The TPP is designed to subordinate the Nations of the World to the Global Banking System throught the might of US extradition and sham Justice and backed by US Military Might; As the USA is run by Liars, by Lying being the Expectation, the Subjectivity of the USA is to conquer by Lies and the Gun.

The Bankers want it all.

Yes, this disease is indeed: The deadliest form of CANCER ever to appear on this Planet. And, it is pervasiely ubiquitous.

Ho hum

JR's picture

Powerful comments! Aquarius.   +100!

And it might be added that banker-backed Obamacare will become the most divisive issue in the history of America, dividing the people into two classes, rivaling only the civil war. The market's dead from property rights abuse; Obamacare's destroyed it.

How was it that a man like Obama was elected to the presidency of the United States and how can he get by with what he does? It’s because he has strings attached to his arms and legs. The bankers make him move; they are the people who write what he has to say; it is they who move the hurdles out of his way. He is an actor and he is using the lines that someone else has given him.

We should understand that this hatred of Obama has created two basic questions: how was he able to make it to the Oval Office, and what kind of system produced and now supports him?

And you've just named it.

People with intelligence can see Obama isn’t central to what’s going on. It’s what’s behind him. It’s the Fed.

We've got to get the Fed's boot off the neck of American capitalism and her private market. And it has to begin with the death of Obamacare. Obamacare not only is property rights abuse, it is unsustainable and unconstitutional.

Radical Marijuana's picture

I agreed with JR's view of your comment, Aquarius. However, as I always insist upon, there is a NECESSARILY COMBINED MONEY/MURDER SYSTEM. Given that, our deeper problems are trillions of times worse than merely the Fed, or the banksters in general, as the current acting top carnivores, or top parasites, in the the human ecology system. Therefore, I would presume that the probable outcome will more likely end in "Global Burn" than anything better. In that context, I take an ironic view of the last sentence in the conclusion to the article above, which recommended "Money needs to be fully privatized – the State cannot be trusted with it."

I regard the primary problem as being that the sovereign powers of the State were privatized, by the control over the public money supply being transferred to the private banks, which became globalized through a central bank system, currently presided over by the King of Kings of Frauds, the Bank of International Settlements, which was achieved by the international bankers covertly applying the methods of organized crime to take control of the political processes.

HOWEVER, REALITY CONTINUES TO BE THAT MONEY IS MEASUREMENT BACKED BY MURDER.  Therefore, I regard more privatization of money as being even more privatization of the murders that back up that money. Indeed, my view IS that is what has actually happened ... which is a main reason behind why we are headed towards collapsing into chaos ...

Overall, the combined money/murder systems rapidly becoming global electronic frauds, backed by atomic bombs, have generated problems which are way, way, worse than anything before in human history. Therefore, an inconceivably bad "Global Burn" obviously appears as the most probable final outcome of that. The only genuine alternatives would require negotiating better death controls, to back up the debt controls. The only way to have a sustainable monetary revolution would be to go through a corresponding revolution in the murder systems. ... Good Luck With That! To understand my view further, take a look at my recent comment on this article:


A Grand Unified Economic Theory?

Aquarius's picture

Agreed @RM


You say: "Therefore, an inconceivably bad "Global Burn" obviously appears as the most probable final outcome of that. "

My view here and has been for many years, is that this "Global Burn" is not only necessary but mandatory. According to ancient Egyptian texts, the Kingdon of Universal Man was established seperately from the birds and the fishes, plants and minerals and as one views humanity as this aforesaid Principle, one immediately sees the analogical similarity of evolving man to evolving a lump or iron (space) into a singing sword. That is to say, a process of the forge; firing, melting, beating, molding, cooling and returning to the fires. Man, born naked, and as of the Universal Kingdom was designed to suffer from his own hand so as to evole into this Universal Man (the Accomplished).

A quotation:

"The individual has always had to struggle to keep from being overwhelmed by the tribe. If you try it, you will be lonely often, and sometimes frightened. But no price is too high to pay for the privilege of owning yourself." - Friederich Nietzsche

The Human problem and condition is having imposed upon us innately both the capacity of Objectivity as well as Subjectivity. This condition through fear and comfort has led the growth of the State and its composition of a priori, binding Collectivism where all members must sacrifiice the essential part of themselves to the group thought and action. This is the foundation structure and organization of religious system of dogma and Economics as a Faith pseudo-science. This is also the "Banality of Evil" where "Nobody is responsible" (Hannah Arendt) which has ruled since well before the Bolshevik Revolution to this day, and which has ruled the Globe in increasing strides and velocity through Banker dominated, initiated, instigated, murder and genocide - hundreds of millions murders and for what?

The Kingdom of Man (the Accomplished) grants all men (this includes the female or woman - Gospel of Philip, Sayings of Jesus) the promise of Accomplishment and where Isaiah is told (by God) to tell the people that they must not elect a King as by doing so, this King will steal from you, murder you and do all wrong things to you and Yours. Ignore the great wisdom of the Ancient Egyptians at your own peril for what they say in proper translation and interpretation has all been brought forth by our own action, mental and physical.

And that the forces granted to Adam (Humanity) are full and complete Universal forces and therefore both good and bad (evil) (the latter being Subjective and moral), so it is stted; there is a necessary choice; there is a necessary learning by experience and the certainty that is ever present, are these dynamic forces of change.

Therefore, one sees those in Power desperately trying to hold the Status Quo, at any cost, and that cost is murder, destruction, loss for most of the 99% and we know all this already in history, so why is Bernanke et al, attempting to even pretend to hold back the tidal waves of dynamic change. Not a difficult question!

Sometimes I laugh at the USA trying to always corner the Gold Game but because they can't help themselves in stealing all they can, they need to sell their own Gold so as to keep their own economy afloat and now, one does not need to guess too hard, albeit in Risk, to come to the conclusion that the USA has merely a few bars left of its own Gold and which are probably full of Tungston. And when the US dollar collapses, so to will the UK Pound, and the Euro, along with the Japanese Yen and a number of other Fiats tied to the manipulation of the moronic establishment economists (and central banks) and those masters of propaganda, lies and thieving, incompetent politicians. Bureaucrats don't count as they are a disease as proven beyond any doubt by the trial of War Criminal Adolf Eichmann and von Mises (Bureaucracy).

But a last tidbit for thought: It is possible that the Radiation fallout via the Pacific which has now reached the Western Coast of the USA, will destroy the USA before its Economic-leadership Collapse. It is intensifying, as predicted and could reach criticality to establish and uncontroable fission event - think a Yellowstone caldera which appears to have reach the fruition point of a ripe boil.

Note that the Gold Vault Businesses (now Industry) in Asia are Booming; so much for paper gold.


Ho hum

JR's picture

Good argument, and I agree, Radical. I gave the author benefit of the doubt on that last sentence, but taken any further it must be clarified. Money in the hands of Supra-National Money Creators – the international central bankers - has become a weapon that within the life of the Fed has rendered nations powerless to protect themselves from banker control.

As Hail Spode wrote earlier on ZH  “The real problem is that government cannot be trusted with money.  Period….

“Government should be banned from issuing money, and be strictly limited to enforcing the implied contract of the value of hard money between issuer and user.  That concept is a part of a philosophy of government called Localism http://www.barnesandnoble.com/w/localism-a-philosophy-of-government-achbani/1114141668

G.M. Coogan, who stood firmly against the money manipulators, went into that and gave her view in Money Creators in 1937:

“If the Government (or dictators of government policies such as the Fed) controls the lending of money, it can determine who may or who may not borrow money and hence can control every single business in the country. (Think of Pelosi/Reid/Boehner/Lew/Obama issuing and controlling the money supply and who gets it, especially in light of the current corruption within the IRS.) Controlling every business means controlling every economic activity; control of every economic activity gives power to control also the cultural and spiritual activities of the citizen… Lenin recommended Government origination and control of the medium for exchange. Unless the power to originate money is restricted to sovereignty and scientifically exercised, and lending is restricted exclusively to private, independent, State-chartered corporations, it is nothing short of childish prattle to talk about preventing the onrush of Socialism, or whatever name one wants to use to designate an anti-Christian State, in which all but the ‘chosen few’ are hopeless slaves.”

Coogan, in her book, says that creation of money -- the issuing of claims to goods and services valid and acceptable to all the citizens of a country -- is by right a prerogative of the authority exercising jurisdiction over the whole country.

Says Coogan: “The most dangerous things that could be done would be to place the merchandising of money in the hands of the National Government.  Such a step would give the internationalists their final weapon to destroy the property and personal rights of loyal citizens… (Think of how the bankers have purchased control of the U.S. Congress and the Presidency.)

With regard to the lending of money by privately owned corporations, she says “existing banks should be divided into two separate institutions…   The first…carrying deposits subject to withdrawal would require 100 percent reserve and no interest would be paid but depositors would pay a bookkeeping service fee.

“In addition, there would be loan-banks for lending or investing.  These savings-banks would get the money to lend from their own money (capital), from the money received from customers (savings accounts), from the money repaid on maturing loans…”   The only limitation on banks loans would be that no money could be lent unless there was money to lend.

That was written three-quarters of a century ago. Within that time, the bankers using an unbacked fiat currency have consolidated power over much of the once-free world.

JR's picture

And how is a near decade of ZIRP working out for the US of A?

Shadowstats Alternate Unemployment Rate* in contrast to the Official U-3 & U-6  rates–  updated November 8th, 2013 – shows unemployment on an increasingly upward trend. October unemployment, according to Shadowstats, hit 23.5 percent of workers.

On the other hand, the U-3 unemployment monthly headline number and the U-6 unemployment rate, i.e., “the Bureau of Labor Statistics’ (BLS) broadest unemployment measure, including short-term discouraged and other marginally-attached workers as well as those forced to work part-time because they cannot find full-time employment,” are moving downward.

*“The seasonally-adjusted SGS Alternate Unemployment Rate reflects current unemployment reporting methodology adjusted for SGS-estimated long-term discouraged workers, who were defined out of official existence in 1994. That estimate is added to the BLS estimate of U-6 unemployment, which includes short-term discouraged workers.”


BTW, It Is High Time That Central Banking Is Recognized for the Disease It Is at long last pinpoints the ignored piece in the central bank puzzle -- finally, we're getting somewhere.

moneybots's picture

"It is high time that central banking is recognized for the disease it is."


It is high time that it is high time.  It was recognized 100 years ago.  It hasn't changed anything in 100 years.

Denninger noted that several Tea Party members who were elected as republicans, climbed into the pockets of the bankers once in office.  The more things change, the more they stay the same.  It is high time that it is high time.

JR's picture

It was the assault by Tea Party member Ted Cruz on Obamacare that identified the duplicity of the Establishment Republicans so thoroughly that many are having big trouble even returning to their districts.

A massive push from the conservative Republican base from across the country has cornered these Republicans-In-Name-Only (RINOs), identifying them as appeasers, deceivers, and White Flag congressmen willing to sell out their constituents for a pat on the back from the Democrats.

The Washington Post presents them as the voice of the Republican Party but they are the voice of the lobbyists. Denninger, if I recall correctly, voted for Obama.

Yes_Questions's picture



Its simple.


Central Banks provide credit to governments and wages are taxed to fund the interest on that credit.


Fucking Cancer indeed and it is time to Cut It OUt of the body! 

Oldwood's picture

But we LOVE our masters....don't we?

Anusocracy's picture

I do.

I support self-government.

R_J's picture

GREAT piece,  H@nx!

rustymason's picture

The early Church, the early Americans, and many of the American Founders tried to warn us about the international banksters, but we didn't listen. We got greedy and believed the banksters' lies.

squexx's picture

We all know what absolutely evil, Satanic tribe is behind Central Banking, now don't we?!?!?

geewhiz's picture

The tragic comic opera that is the world today emanates from the standing contradiction of convincing humans that were created sentient that they are free when they are really slaves.

Either you are free and represented by free systems or you are an inferior slave that should just shut his mouth and do as he is told or else. Either way is easy to understand but this soft slavery shit papered over with sophistry and hypocrisy is really maddening for any kind of thinking person to get their head around. That's why nothing makes sense. I'm sure the tribe will figure it all out in due course and tell us what to do, they have the Mensch after all so we are in good hands.