Burgess COMMENTARY

Peter Burgess

THE PATH OF DEBT Money from nothing send to special banks ^ Banking cartel uses this money to create loans for governments plus interest ^ Paying back the loan created from nothing Ireland Portugal Government Bond Government Bond Government Bond THE MAGIC: The Federal Reserve System (a private institute owned by banks) is able to cre ate money by being asked for it by primary dealers. THE CARTEL: These banks are primary dealers both of the Federal Reserve System and those of european government THE DEBT: Debt is created by governments asking for loans. Its more popular than tax. The interest for the loan is proposed by rating acencies. But these are owned by the banks as well. They are their shareholders. Banks are setting the final interest on auctions for the loans. When they are rising it, governments at some point have to ask the International Monetary Fund for loan. Which yields the privatization and cutting of social welfare. Ireland Portugal Government Bond Government Bond Government Bond Shareholding partly owning lending money interest depends on rating € € Greece Spain € € Ireland Portugal Government Bond Government Bond Government Bond DAX German Stock Index Germany RBC Mizuho HSBC Citigroup Barclays J.P. Morgan Crédit Agricole Merril Lynch BNP Paribas Nomura Bank of Nova Scotia Jeeries Goldman Sachs Deutsche Bank Credit Suisse Morgan Stanley BlackRock Société Générale UBS Royal Bank of Scotland $ $ i i Shareholding partly owning lending money interest depends on rating € € Greece Spain Glossary The Federal Reserve System is a private institute mimicking a central bank organized by its member banks. They can act on their own and only have to tell the United States Congress two times a year what they are planning to do. (Federal Reserve Act Section 2B). To become a member bank one has to buy Federal reserve stock equaling six percent of its capital. (12 CFR Part 209) The Federal reserve is paying back 6 percent interest to its shareholders. Primary dealers serve as trading counterparties of the New York Fed in its implementation of monetary policy A repurchase agreement, also known as a repo, RP, or sale and repurchase agreement, is the sale of securities together with an agreement for the seller to buy back the securities at a later date. The New York Fed meets regularly with advisory groups to obtain essential perspectives on the economy. Through the sponsored groups, the New York Fed helps facilitate the development and adoption of industry best practices designed to strengthen and improve the eciency of the financial system as a whole. Creation of Money After meetings of the Open Market Commitee, people at “the Desk” at the Federal Reserve Bank of New York are typing numbers into the FedWire system sending the values to a primary dealers account. Which equals creating money from nothing which then has to be paid back by governments plus interest. A government bond is a loan for a government. This way a government can pay more than it earns via tax. A group of primary dealers are giving loans via an auctioning sysem. The interest is set here. But the primary dealers are looking at credit ratings to set the height of interest. The rating agencies are owned by the primary dealers by being their major shareholders. The primary dealers can sell government bonds to hedge funds and other financial institutions. This is called the secondary market. They can create money by selling and reselling bonds again and again. Which is disconnected from the quality and performance of real goods. But when primary and secondary market agents decide to like huge interest, a government might not be able to pay back the loan and therefore must ask the International Monetary Fund (IMF) for another loan. This institute wants political adjustments with the loan. It is selling a governments resources to investors (privatization) and cutting social welfare. (austerity) Sources: http://www.newyorkfed.org/markets/openmarket_concepts.html http://www.newyorkfed.org/aboutthefed/fedpoint/fed32.html http://www.nasdaq.com/symbol/mco/institutional-holdings http://www.nasdaq.com/symbol/mhfi/institutional-holdings http://www.nytimes.com/2011/01/11/business/economy/11fed.html http://online.wsj.com/article/SB125720947716624249.html http://www.moodys.com/credit-ratings/Ireland-Government-of-credit-rating-423933 http://www.moodys.com/credit-ratings/Greece-Government-of-credit-rating-348330 http://www.moodys.com/credit-ratings/Germany-Government-of-credit-rating-333700 http://www.moodys.com/credit-ratings/Spain-Government-of-credit-rating-704550 http://www.moodys.com/credit-ratings/Portugal-Government-of-credit-rating-614650 http://www.handelsblatt.com/finanzen/boerse-maerkte/anleihen/ratingagentur-sundp-sieht-fuer-irland-bessere-zeiten-kommen/7768848.html http://www.ise.ie/Membership-and-Trading/Primary-Dealers/ http://www.bankofgreece.gr/Pages/en/Markets/HDAT/members.aspx http://www.deutsche-finanzagentur.de/fileadmin/Material_Deutsche_Finanzagentur/PDF/Pressemitteilungen/Pressemitteilungen_2010/pm_36_15122010_dt_BIETERGRUPPE.pdf afme.eu/EPDAHandbook/Spain/ afme.eu/EPDAHandbook/Portugal/ http://www.imf.org/external/np/loi/2012/grc/122112.pdf http://www.imf.org/external/np/loi/2010/irl/120310.pdf http://www.imf.org/external/np/loi/2011/prt/051711.pdf Christopher Warnow 2013, christopherwarnow.com, hello@christopherwarnow.com