They can do whatever they want which is why they keep on doing stupid things, being human. Time to discuss the true nature of 'money' and how it operates in the magical universe.

Greenspan: Fed isn’t a ‘magical piggy bank’
Former Fed chief says government needs clear process of handling bailouts

Greenspan, 82, who ran the Fed for 18 1/2 years and was the second-longest serving chief, says he is concerned that Capitol Hill will look to the Fed's actions "as a wondrous new font of seemingly costless federal funding — a magical piggy bank."

The United States has long "abandoned the notion that we should leave crises to be resolved solely by the marketplace," Greenspan says in making the case for new powers in this area.
*snip*
Greenspan calls the current crisis "one of those rare, once in a century or half-century events." The full closure on this crisis is "a way off," he says. The U.S. economy, he observes, appears to be "on the brink of recession." And, worldwide inflation, he warns, is creeping, which will pose a challenge to central bankers, he says.

Looking back, Greenspan says governments and central banks probably could not have altered the course of the once high-flying housing market and broken through investors' fevered euphoria.

Mr. Greenspan is always nakedly amusing. He was the planet's #1 money making magician for many years. He was treated as if he were some sort of god rather than being viewed as a total gnome. As he waved his magic interest rate wand, money flowed like honey over the entire planet. When he fixed a necessary correction in a very overheated stock market by dropping rates to only 1%, he created the fundamental basis for global inflation.

It is also amusing to me to hear Greenspan deny that the Federal Reserve is a magical piggy bank. The fact that he has to deny this obvious truth is pure 'magician' activity: he waves his wand, chants magic spells and the magical piggy bank vanishes and is replaced with a gold-based currency quality reality. The sleep of the money magicians is very disturbed lately. They are blurting out all kinds of interesting things.

The concept of the magic piggy bank is the foundation of all banking! Many outsiders of the official talk circle in our government and media, understand the true nature of the Federal Reserve and its status as the Ultimate Piggy Bank From Hell. Let's focus for a minute on what a real world piggy bank does: it holds cash that is saved. It sits on a shelf and every time one has spare change, one puts it in the slot at the top. A true, honest piggy bank is made in such a way, the only way one can get money out of it is to break the bank.

The concept of saving money for the future is very ancient. Throughout history, people saved money by hiding it in dark holes, deep caves, buried in the fields, hidden in the rafters. The worry was always, will someone steal these savings? In this world of eternal uncertainties came the Bardi family of Italy. I am a descendent of the English branch of this family. My great grandmother on my grandmother's side was a Bardi. The medieval Bardis of Tuscany figured, they could make savings 'grow' if they held everyone's savings in a very secure place and then put out letters of lending against it. So people could travel to China and use these letters to access funds held in China, for example. No money physically moved. Just promises of money.

Robbers, for example, were always on the lookout for traveling merchants and others. They would steal the gold and silver. But if they stole a letter, they would be unable to use it since it required the merchant's involvement in discharging the promises of this letter of credit. So it rapidly became very popular with kings, lords and dukes. The King of England had a brilliant idea. Edward III needed money for wars. He was about to set England into the War of the Roses. But he didn't know this. He wanted to invade France, as usual. But raising taxes and fees in England always triggers insurrections and riots. So he asked for an advance on future taxes and the Bardi opened a credit line for him.

He lost his war and defaulted on the loans. Since he brought no loot home from France, taxes had to go up and the Bardis in England were left stranded when the family firm went bankrupt. This was lesson #1 in magical banking: If you lend to Kings and lords, they will use this to go to war. Lesson #2: Kings and lords can and will default on loans. Lesson #3: the only entities that can really loan money to Kings and lords are the taxpayers or other Kings and lords. When the King owing the money defaults, the lending King can then rush over and kill him.

In modern society, if a government is solvent, all banks are easily kept solvent. But if the bankers lend to Emperors and Dukes like the Federal Reserve did right off the bat after being created in 1913, this will fuel massive wars and as always, the losers will go bankrupt. If a war is bad enough, the WINNERS go bankrupt, too. In the case of WWI, everyone except the US went bankrupt. This was papered over via the US lending even more money to everyone who fought that fruitless, worthless war. Then, one by one, they still defaulted so that by 1933, the US banking system itself, was going bankrupt.

There is this iron-clad rule that governs magic piggy banks: if no one puts any savings in, the piggy bank's magic will fail. The present US banking system has been based on lending, not saving, for quite a while now. When Greenspan was in charge of interest rates, he dropped them to 1% to activate the magic powers of the piggy bank. It worked. Lending took off like a rocket. But savings collapsed.

The other iron clad law of the magical piggy bank is, if you break the bank to get to the savings that remain inside so you can spend it on candy or toys, the bank can't work anymore! Well, the US broke the banks. They are ALL broken now. They broke because they ceased to attract savings and the only way to keep things going now is to break all the banks and steal all the savings that are harbored there.

Now for some real, real magic: when the Great European Powers bankrupted the American banking system when they found themselves unable to pay for the utterly stupid WWI debts, the US savers lost every penny they had in the banking system. The remaining savers all rushed to the broken magic piggy banks and demanded their money back so they could bury it in deep holes or hide it in the rafters. The government of the US was solvent, unlike all of Europe. So the new President, Roosevelt, closed all the broken piggy banks and used the SOLVENT US government Treasury to restart the banking system with the SOLVENT US government funding in the form of not only Teasuries handed over to the Federal Reserve system but also by becoming the INSURER of all savings.

This 'fixed' the magical piggy banks and banking restarted. But suspicious savers didn't trust it all that much. Banking limped along, barely able to lend to anyone at any interest rate. Another World War was required to restart banking in seriousness. This was because the US barely took on even slight damage from WWII and thus became the main supplier of all manufactured goods for a very lucky 25 years. During this time, virtually no US magic piggy banks broke.

But the American people grew very arrogant. They began to enjoy the power of being the world's top currency. But as wild spending in the US and the rise of the use of excess credit took off, this coincided with the rest of the planet recovering from WWII and contesting with the US for world export markets. So the US began this long decline. At first, the US tried to eliminate the fundamental basis for international banking since the Bardi bankers began this system in 1300 AD: the gold standard.

This launched global inflation. To fix that, the US decided to pursue a new scheme: drop wages at home by going abroad for cheaper labor. For labor is NOT magical. It is real. It has to happen in the real world with real people producing real things. It requires time and effort. It requires investment of things of value: land, minerals, water, air. It is the true basis of all wealth. A herd of cattle with no cowboys is just a wild collection of free creatures. A mountain with silver or gold is just a mountain if no one can dig it up. The one thing that brings in wealth from the fertile plains is human labor. The one thing that turns inert planetary materials into exciting things humans want requires labor. Thinking up new inventions is done by humans who must invest many years in learning how to do things in the physical world of reality. There is NO magic in this at all.

But to make the magic piggy bank work is pure magic: all one has to do is use numbers. With computers, the ability to race to infinity has been perfected. We see today the rush towards creating infinite money using the magic piggy banks. New readers of my writings have to accept the fact that money is unreal. It represents labor. It represents planetary resources such as land, water and air. It is 100% magical. Even if it is gold, its relation to all things created via labor is whatever the collective economy decides.

Because of this, there is a paradox at work here: money is the easiest thing to make if it is made from electronic digits registered on massive computer banks. Computers were created for one purpose only: to make nuclear bombs and track human populations. The second use of Univac was to process the huge numbers astronomers use to talk about the entire universe. When bankers got their paws on computers, when governments figured out they could use computers to speed up money creation, they couldn't resist the temptation. But the paradox of money is exactly like anything physical: if it multiplies too fast, it overwhelms the environment.

For example, if I was raising cattle and everyone was also raising cattle and if cattle cover the earth, the value of cattle will plummet since there are too many of them. Anyone raising chickens will beat out the cattle people. If everyone raises corn because corn is high in profits, the profit margin for corn falls and the profit margin for wheat rises. With money, if one nation grows too much money, it loses value vis a vis all other currencies. This is the brake that inhibits governments from overspending, over reliance on the magic piggy bank, etc.

But when the entire world is encouraging one country to overspend limits and to ignore the dangers of using the magic piggy bank, we get the mess we are now in. Our trade rivals are absolutely desperate to get the US spending money we can't afford to spend. I know for a fact that the communist Chinese party's 50 year plan includes doing this to the US to the point of bankruptcy. The Chinese will lend to us until our other trade rivals cease lending to us. At this point, the US will be besieged by creditors demanding either higher interest rates for loan turnovers or demanding territorial deals. China, for example, wants Taiwan as well as the removal of US nuclear naval forces from Asian waters.

Greenspan is a traitor. When he came into the Federal Magical Piggy Bank, the Chinese were very poor. When he left, they were our #2 creditors right after Japan! The US FOREX reserves were at $50 billion when Greenspan took control of this piggy bank and was at $60 billion when he left. China's FOREX reserves were at $20 billion when he came in. And $1 trillion when he left. Japan's went from $50 billion to a trillion dollars, too. It was treason and still is treason for the president of the Federal Reserve to sit idle while our direst trade rivals, Japan and China, both run up giant FOREX reserves while we buy virtually no yuan or yen. All we did for 35 years was jawbone Asia into dropping the value of the dollar and raising the value of their own currencies. The Japanese would do this on occasion. But always managed to prevent the US from exporting to Fortress Japan via various obvious tricks and schemes.

Don’t Turn Off Recession Siren Yet

GDP swelled 3.3% at an annual rate in the second quarter, the Commerce Department said. That came on the heels of 0.9% growth in the first quarter, meaning the economy grew at more than a 2% annual rate during the first half of the year — a time when many economists, including Federal Reserve staff, thought it would shrink.

GDP is a consumption-based measure, adding up consumer, business and other spending and investment as well as net exports. GDI is income-based, adding up things like personal income and corporate profits. GDI is included in quarterly GDP, but not in the first, or “advance,” estimate, so Thursday’s report was the first for second quarter GDI.

The US government is very dishonest to use consumption numbers to gauge economic conditions. When those numbers began to fall, the government broke open the magical piggy bank and made a very, very inflationary injection of fake money. Every American got a $600 loan! And this was advertised as a gift, not as it really is, future indemnity against our future wages. This increased consumption. Most of which was eaten up by a sudden, very violent surge of inflation. People who could save this $600 might have some benefit. But they would have had to not buy any oil products or food if they wanted to save this money. Instead, almost every penny of this was spent on higher food and fuel costs.

Yen Rises Against Euro, Dollar on Deepening Recession Concerns

(Bloomberg) -- The yen climbed to the highest in more than a year against the euro on concern the credit-market slump will lead the world into a recession, prompting investors to sell higher-yielding assets funded in Japan.

The dollar fell versus the yen before a U.S. government report that will probably show employment dropped for an eighth month. The yen also jumped to a two-year high against the Australian and New Zealand dollars as investors reversed so- called carry trades after stocks and commodities slumped. The pound weakened for a ninth day versus the dollar.

``There is a big move in terms of risk aversion and we can see the yen getting stronger from here,'' said Martin McMahon, a currency strategist in Zurich at Credit Suisse Group. ``The world is not particularly rosy and the credit crunch and financial problems haven't gone away. It's not appealing to stay in carry-trade type positions.''

This week, the LDP which is the party that has run Japan about as long as the communist party has run China, has seen yet another leader fall. None last more than a year as the Japanese workers begin to get really restive. They are denied credit and can't save money because of the near-zero interest rates the banks offer there. This zero interest lending to foreigners is called 'the Japanese carry trade' and this is what is collapsing this week as the yen once again soars in value in international FOREX markets.

The Japanese magic piggy bank is an anti-bank: it holds US FOREX dollars but virtually NO Japanese savings. Inflation is raging in Japan and rates are kept at zero despite this. So all savings are now flowing to other magic piggy banks. Only ALL of them are breaking! The breaking of these banks so desperate bankers and governments can steal savings is why the entire system is now going down in destruction.

BRIC Bubble On Verge Of Collapse

(Nikkei)--After a dizzying expansion, the BRIC bubble appears ready to burst. Share prices in Brazil, Russia, India and China -- the so-called BRICs -- have been declining sharply because of the global credit crunch and military tensions, likely forcing Japanese retail investors to change their investment strategies.

In the past year, the Shanghai A-Share index has plunged 60%, India's Sensex index 33%, Russia's RTS index 32% and Brazil's Bovespa Index 25%.

These falls were triggered by the global credit crunch that stems from the subprime loan problem in the U.S. Investment funds that have suffered losses have been withdrawing their money from these emerging economies.

These nations also face the risk of inflation due to high growth, abundant of money flows and higher prices of natural resources. As a result, their central banks have tightened their monetary policies, spurring a decline in asset prices.

Across the globe, magic piggy banks are in reverse. Instead of producing wealth, they are eating wealth. Any savings going into them drops in value since no one is paying the right interest rate to keep ahead of inflation. This broken system can be fixed only one way: raising global interest rates. The BRIC nations did that, led by China. China's hot stock market is cold right now and banks are not lending easily but this is because the Chinese government forced them to stop.

The communists took away the magic piggy bank. They replaced it with a mechanical piggy bank that really does hold savings. So anyone saving money is doing fine. People borrowing money so they can speculate in markets are doing poorly. But then, this is the only way to protect the magic piggy bank. To NOT use it for infinite wealth. But to be very sparing with it. Careful not to abuse its vast powers. And above all, not to break this wonderful thing.

Author Elain Supkis blogs at Culture Of Life News