Friday Road Trip 12/19/14
I have talked a lot over the years about the Fed Boston booklet called "Banking Basics" that was released the same day (1/1/2007) as the "Wishes and Rainbows" and "The Road to Roota: A Teachers Guide. In this booklet it has pictures of people cashing in paper money for gold at banks and standing in line at ATM's with gold in their hands and many other secret hidden meanings. The Fed Still has the booklet up on their website here:
http://www.bostonfed.org/education/pubs/bankingbasics.htm
In this booklet they talk about 2 ways that a bank can fail and use fictional accounts to demonstrate their points. One of the ways is to make too many real estate loan in a boom and a turn in the markets can damage the bank....hence the 2008 housing crash.
The second way they discuss is making too many loans to OIL COMPANIES and when the prices fall the bank can fail!!!
Sound similar to what is happening now???
Here's the story on page 31...
Banking Basics
Gusher National Bank Slips on Falling Oil Prices
Falling energy prices mean cheaper gasoline and lower home heating bills. So, falling oil prices must be good, right?
Not for everyone! Take the case of Gusher National Bank. Gusher was very aggressive in making loans to oil and natural gas companies that had no problem repaying their loans when energy prices were high. The loans spelled big profits for Gusher, and everyone agreed that Gusher's executives were smart business people who really knew how to make money.
Then the economy slowed down, and the demand for energy fell. Factories burned less oil and natural gas. Truck drivers, commuters, and vacationers drove fewer miles and burned less fuel.
As a result, energy prices dropped sharply, and many energy companies fell behind on their loan payments. Some even stopped making payments altogether. Months passed, oil prices remained low, and more energy companies fell behind on their payments. Finally, Gusher lost so much money to bad loans that government regulators had to step in and close the bank. Gusher had fallen victim to changing economic conditions--falling energy prices and a high concentration of loans to energy companies.
END
The Oil-Price-Shock Contagion-Transmission Pathway
http://www.zerohedge.com/news/2014-12-14/exposing-oil-price-shock-contagion-transmission-pathway
As we noted previously, counterparty risk concerns (and thus financial system fragility) are starting to rear their ugly heads. In the mid 2000s, it was massive one-way levered bets on "house prices will never go down again." When the cracks started to appear, the mark-to-market losses in derivatives led to forced liquidations and snowballed systemically. In the mid 2010s, it is massively levered one-way asymmetric bets on "commodity prices [oil] will never go down again." Meet WTI-structured-notes... the transmission mechanism for oil-price-shocks blowing up the financial system.
Because nothing says exuberant ignorance like limited upside, unlimited downside OTC (illiquid) derivatives.
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I wonder how many trillions are in leveraged oil derivative notes like this one!
And of course as Russia knows the game they are stockpiling GOLD!
Putin Is Hoarding Gold and Rattling Sabers--What's He Up to Now?
http://www.thefiscaltimes.com/2014/11/14/Putin-Hoarding-Gold-and-Rattling-Sabers-What-s-He-Now
Russian Currency Crisis and Defaults Could Create Contagion in West http://www.goldcore.com/ie/gold-blog/russian-currency-crisis-defaults-create-contagion-west/
The effects of the crisis are already being felt in western Europe and in the global financial system.
Austria's third largest bank, Raiffeisen Bank lost 10.3% of it's share value on the news that the Russian central bank had raised rates a stunning 6.5% overnight on Monday.
It is worth remembering that it was the bankruptcy in 1931 of Austrian bank Creditanstalt's, founded by the Rothchild family, that resulted in a new global financial crisis and ultimately the bank failures and deep recessions of the Great Depression.
In France, Societe General -- a bank which is also exposed to the Russian economy to the tune of €25 billion -- lost 6.3% of it's share value. If the Russian crisis continues, and there is little to suggest it won't -- with the U.S. set to impose a new round of sanctions, the repercussions for the west and the global economy could be drastic.
In the modern, interconnected, globalised world of today, there is a real sense that and a risk that western leaders are "cutting off our nose to spite our face."
The global banking system has a very limited capacity to absorb sizeable losses and the risk of contagion is as high now as in 2008. It may be the case that western banks and institutions have more to lose than Russia in the longer term.
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Putin gave very little away during his latest press conference other than saying that within 2 years Russia will turn the ship around economically.
Here's a summary from the mainstream media outlet Bloomberg:
- Vladimir Putin said that Russia's economy would recover within two years. He did not identify concrete measures but referred to the world's need for energy increasing again as the global economy recovered and diversification of the economy in the interim.
- He blamed "external factors" for problems with the economy and the ruble. Putin described sanctions against Russia as "illegitimate" and said that Saudi Arabia and the US "might" have conspired to lower oil prices to harm Russia (and Iran).
- The Russian president said that it was illogical to blame him for current frosty relations with the west. Referring to the number of US military bases around the world and its deployment of anti-ballistic missiles in Europe, he asked how Russia could possibly be seen as the aggressor. He also compared Nato expansion to the Berlin wall.
- He repeatedly said that he wanted a diplomatic solution to the crisis in Ukraine. Putin said it must be solved by political means in line with fundamental international principles, including the right of self-determination.
- Putin said it was "too early" to decide whether he would run for president in 2018.
END
*Note that Putin blames "external factors" for the fall in oil prices blaming the Western powers. Although he points to the sanctions what he really MEANS is that the Western powers are rigging the markets trying to destroy his country. Everything he said hints that he will continue to play their game until Russia is ready to shut the banksters out of the system, default on Billions of Bankster loans and move forward. Well plaid Valddy!
Overall...as I predicted a couple days ago, it is a bit too early for this master chess player to show his cards. At any moment he could default on billions in bank loans or say something related to gold and silver and then POOF...there goes the Global Fiat Monetary System.
But that would put Putin and Russia in the unenviable spot of being BLAMED for the global collapse and he does not want to go there. He wants the BANKSTERS to hang themselves and take all the blame.
So the game moves forward with Putin confident that within 2 years Russia will be an economic powerhouse.
I think he will be correct and Russia will turn it around although it won't take 2 years as the further cutting off of the Russian people from food and access to the global financial system will shorten Putin's time frames.
With the signing of the latest budget the USA is now mathematically unable to pay down their debt according to this article...
Paying down the debt is now almost mathematically impossible
http://www.sovereignman.com/trends/paying-down-the-debt-is-now-almost-mathematically-impossible-15729/
I've worked out a mathematical model which shows that, even with absurd assumptions (7%+ GDP growth for years at a time, low interest rates, etc.), it is simply not feasible for the US government to 'grow' its way out.
Default has become the only option. And that could mean a number of things.
They could default on their creditors (other governments like China who loaned money to the US government). But this would spark a global financial and banking crisis.
They could default on the Federal Reserve, which owns trillions of dollars of US debt. But this would create an epic currency crisis for the US dollar.
They could also default on their obligations to their citizens--primarily to future beneficiaries of Social Security (who collectively own trillions of dollars of US debt).
Or they could choose to default on their obligations to every human being alive who holds US dollars… and engineer rampant inflation.
None of these is a good option. And simply put, the US government has reached a point of no return.
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We all knew this given the unfunded liabilities in Social Security and Medicare and of course the TRILLIONS in bankster guarantees but it's nice to see it all in the public numbers.
Roota's plan all along was to flood the system with unbacked fiat money until it breaks and that is exactly what is being done.
We are close on this front.
Lots of gold bugs talking about this news this week...
Why Is The US Treasury Quietly Ordering "Survival Kits" For US Bankers?
http://freebeacon.com/issues/treasury-department-seeking-survival-kits-for-bank-employees/
Emergency masks, solar blankets to be delivered to every major bank in the U.S.
he Department of Treasury is seeking to order survival kits for all of its employees who oversee the federal banking system, according to a new solicitation.
The emergency supplies would be for every employee at the Office of the Comptroller of the Currency (OCC), which conducts on-site reviews of banks throughout the country. The survival kit includes everything from water purification tablets to solar blankets.
The government is willing to spend up to $200,000 on the kits, according to the solicitation released on Dec. 4.
The survival kits must come in a fanny-pack or backpack that can fit all of the items, including a 33-piece personal first aid kit with "decongestant tablets," a variety of bandages, and medicines.
The kits must also include a "reusable solar blanket" 52 by 84 inches long, a 2,400-calorie food bar, "50 water purification tablets," a "dust mask," "one-size fits all poncho with hood," a rechargeable lantern with built-in radio, and an "Air-Aid emergency mask" for protection against airborne viruses.
Survival kits will be delivered to every major bank in the United States including Bank of America, American Express Bank, BMO Financial Corp., Capitol One Financial Corporation, Citigroup, Inc., JPMorgan Chase & Company, and Wells Fargo.
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Come on people! How much more obvious are they going to make it that the banks are teetering and the plan is to destroy the system?
Even a child can see what's going on now.
How The Collapse Will Unfold
A few years back my friend David Morgan released a great video about how this crash may go down referencing the movie "Rollover".
Now is the time to pay attention to this video:
Lots to talk about this weekend so I may put out a few special alerts.
Stay safe.
Bix
