Sep 122012
 September 12, 2012  Posted by at 5:15 pm Finance

Well, the German Supreme Court decision is through, and it looks positive at a first superficial glance, so what could go wrong from here?

Sorry to break it to you, but plenty could. It’s amusing to see that decisions like these, the German court one or last week’s Draghi bond buying announcement, are seen as being positive for markets and/or entire economies, while in fact the only reason they have to be taken in the first place is that the situation is getting worse all the time.

If things were fine, Draghi wouldn't have to buy bonds, and the ESM wouldn't have to be propped up with measures that threaten to violate any constitution or sovereignty. Markets these days rise on bad news, because bad news makes politicians and central bankers hand out the people's money and checkbooks.

In the shadow of the ESM decision, European Commission President Manuel Barroso today, in his "State of the Union" speech, introduced a grand plan plan to hand the ECB what is basically total control over European banks, and move towards political union. As per today's Wall Street Journal:

Mr. Barroso said Europe needs a leap forward in the integration of member states to back up the common currency. He outlined the plans—launched Wednesday—for a single supervisor for all euro-zone banks that will allow some banks to gain access soon to emergency bailout funds.

The Commission asked legislators to adopt the proposal by year-end, a move that will face challenges from a European Parliament seeking to strengthen enforcement efforts and form a requirement that all EU states must unanimously agree the proposal. "We want to break the vicious link between sovereigns and their banks," Barroso said Wednesday.

The proposal gives the European Central Bank authority to issue and revoke banking licenses while ensuring banks comply with capital, leverage and liquidity requirements. The ECB would also be able to carry out early intervention measures when a bank breaches those requirements. [..] "We will need to move toward a federation of nation states. This is our political horizon. This is what must guide our work in the years to come…"

Of course the EU is already a federation of nation states. It's in the level of integration, in the details, where the devil resides. As I wrote recently, former Spanish PM Jose Maria Aznar said only last week that the drive for full fiscal and political union is "deeply misguided": "A United States of Europe is an impossible idea. It is a very serious mistake to try to destroy the nation states". Now Barroso may claim that you can still have a nation state after you have given up your fiscal, political and monetary powers, but that seems mere semantics. Granted, Barroso was shrewd enough cover his tracks:

He called for a clean break with how treaty changes have been pushed through in the past, saying they should win direct popular backing and not be pushed through with the "implicit consent" of citizens.

A good example of what this could lead to, and a solid indication of why Barroso's ideas will never ever be accepted by the people of Europe, can be found in the demands the Troika placed on Greece today. They want to fire 150.000 civil servants, raise the retirement age to 67 years immediately, cut "lay-off compensation" by 50%, and, wait for it, introduce a 6-day working week, and stretch the working day to 13 hours. In theory, that could lead to a 78-hour working week.

As my writing partner Nicole Foss remarked in true Monty Pythonesque Four Yorkshiremen spirit: "I wonder when we'll see the 8 day working week at 25 hours per day". Not surprisingly, the Greek government isn't thrilled at the demands; they can already see their heads end up on top of pointed sticks alongside the winding streets of Athens.

Want to take a guess at how many European countries will voluntarily sign up for similar treatment?

Another event in this packed day (besides the iPhone 5 launch) are the parliamentary elections in The Netherlands (a.k.a. Holland, and yes, I still carry the passport). I've been following campaigns in the past two weeks from the corner of my eye, and even there it's not pretty. There is absolutely nothing being said that reflects Dutch reality. There'll be another coalition government that will lead the country into another 2-3-4 years of delusion. Until either the infighting picks up again, or the real economic situation can no longer be denied. Whichever comes first. Hard to call that one.

And when the latter happens, the blow will be devastating: everyone will look to the government for salvation, but the government will face Troika demands like those presently forced upon Greece. For now, however, I bet you can't find a soul in the whole country who would think this is a realistic scenario. But really, just thinking and saying that you're rich doesn't make it so.

To understand how grave the Dutch plight may be, I’ll take a look at the household debt situation in Holland, mainly through a report issued last week by the government's own Central Bureau for Statistics (Centraal Bureau voor de Statistiek).

One thing to remember: in the election campaign, the only true household debt related issue that was discussed was mortgage interest deductibility, a longtime stalwart. Do they cut it entirely, do they keep it, or do they cut it very slowly? They can't agree. And still that is where the essence of the Dutch debt trouble lies: mortgage interest deductibility. Along with a majority of mortgages being interest only, so people pay interest, but no principal, and that interest is tax deductible to boot. In Holland you CAN have your cake and eat it.

Nor does the mess stop there: over 80% of mortgages are guaranteed by the Dutch government through the Nationale Hypotheek Garantie, the National Mortgage Guarantee. Which is where everyone looking to the government to save them will come in, as soon as house prices start falling for real. But at that point, as I said, the same Troika that now visits Athens may have moved to The Hague (in Holland the government does not reside in the capital, Amsterdam). I can already hear the derisive feel-rich Dutch reactions to my raising such options …

One issue that is hardly ever addressed when it comes to such matters as the ESM is the one of those of the parties involved that are perceived as strong and rich. When the ESM, and bail-outs in general, are discussed, conversation circles around, on the one hand, the PIIGS countries' debts and needs, and on the other, the rich countries' willingness to pay for them. It's rare to see the rich countries' ability to pay questioned, it's all about willingness. Nice smoke screen, but not very convincing once you look behind the curtains.

As an introduction, I’ll start off with some quotes from an article that Ambrose Evans-Pritchard wrote back in April this year – the fact that it comes with a great EPA picture of far right leader Geert Wilders (the only politician to call for Holland to leave the eurozone) is a mere bonus:

Fitch doubts Dutch AAA as property slump reaches 'coma'

Fitch Ratings has issued the clearest warning to date that Holland faces losing its AAA rating if it fails to deliver austerity cuts or lets political conflict intrude on economic management. [..]


Dutch member of parliament Geert Wilders (PVV) during the annual debate on the Budget Memorandum and the National Budget in the Dutch House of Representatives in The Hague, The Netherlands. Photo: EPA

The warning comes as Dutch property tips into deeper slump, with the inventory of unsold homes nearing South European levels. Household debt is the eurozone’s highest at 249% of income, compared with 202% in Ireland, 149% in the UK, 124% in Spain, 90% in Germany, 78% in France and 66% in Italy – according to Eurostat data from 2010.

[..] home prices have fallen 11% from their peak in August 2008 [..]

The stock of unsold properties has doubled to 221,000 since 2008 as "Te Koop" signs proliferate on Dutch streets, almost double the declared level in the US on a per capita basis. [..]

Public debt will climb to 76% of GDP by 2015, according to the official Bureau for Economic Policy Analysis (CPB). [..]

The central bank said in its Financial Stability Report that the country faces a nasty mix of problems. "The outlook for financial stability in the Netherlands is worrying. Dutch households have almost the highest debt in the world. Declining real wages and rising unemployment are putting pressure on incomes. The steady fall in house prices is weakening their position while also increasing the likelihood of debt problems."

The report said credit outgrew the deposit base of lenders during the property bubble, leaving banks dependent on fickle capital markets. "Short-term funding may dry up overnight, as in 2008 when the interbank market stalled and again in the summer of 2011. A drop in house prices will compromise the issue of mortgage-covered bonds, while significant loan losses may lead to margin calls by the owners of such bonds," it said.

The regulator said Dutch pension funds are deeply underwater. They need €90bn in extra funding to meet future obligations, and $200bn to restore buffers.

Critics say Holland’s policy of full tax deductibility on mortgages as well as loan-to-value caps of 112% (with stamp tax) encouraged a debt spree along Anglo-Saxon lines.

To see where this places Holland internationally with regards to household debt, here's a WSJ graph:

And by the way, there's more going on below the surface, as is evident in this graph from Lombard Street Research from a more recent (June 14) Ambrose article:

Dutch Disease

As if matters were not bad enough already in Euroland:

Dutch retail sales collapsed by 11pc in April, even worse than the 9.7pc drop in Spain. (Royal holidays cannot explain this).

As you can see from today’s chart by Lombard Street Research, it is a sight to behold.

OK, at last the Dutch Central Bureau for Statistics report that caught my attention last week, which is kind of based around a comparison between developments in Holland and Germany. Still, the bare Dutch numbers steal the show. A few snippets; the translation is mine.

Mortgage debt in Holland

Total long term Dutch household debt rose from 56% of GDP in 1995 to over 125% in 2011. More than 90% of this is mortgage debt. The rise in long term debt was faster than in France, Spain or the UK. In Germany, relative household debt even fell. Hence, while Germany had the same debt quota as Holland in 1995, in 2011, it had half that of Holland.

Along with mortgage debt, home prices in Holland rose at an explosive pace until the [2008] crisis. Around the turn of the century, they rose close to 20% annually.

From 1985-2007 average Dutch home prices went up 228%, while price inflation was 56%. In Belgium, Spain , Ireland , the UK and France they also rose more than threefold. In Germany, however, home prices fell. [..]

The relationship between home prices and mortgage debt is complex. Normally, newly closed mortgages rise along with home prices, but in other countries with rising home prices mortgage debt rose less fast than in Holland. Mortgage interest deductibility seems to have played a decisive role in this. [..] Germany offers far less fiscal advantage for home buyers.

Though mortgage interest deductibility stems from 1893, it was only in the 1990s that its benefits were fully employed through new mortgage constructions, like savings mortgages and investment mortgages, the essence of which is that only the interest is paid until the mortgage reaches maturity. Only then is the principal paid off. Until then households pay into a savings (investment account). Put together, these plans allow for lower monthly costs and higher purchase prices. This pushed home prices upward.

The fiscal attractiveness of high debt caused rising home prices to translate into extremely high mortgage debt levels. In other countries people did pay down the principal, because there was no drive to let debt remain as high as possible for as long as possible. [..]

Rising home prices – until the 2008 crisis – increased the value of total Dutch domestic real estate, which made households wealthier.

Moreover, from 1990 to 2007 it was so easy to close second mortgages on the added value of the home, that additional mortgage loans were 50% higher than was needed to finance purchases of, and investment in, real estate.

Loan to income ratio (i.e. effective mortgage) debt was much higher among young people than older ones, at 6.9 times disposable income vs 3.3 times.

Banks have lent far more money than they have on deposit. The difference needs to be financed in the markets (i.e. mortgage backed securities). This means that when interest rates rise, banks can get into trouble. It can even become impossible for the banks to finance the mortgage debt. This is a problem for the government, which guarantees all Dutch banks. An additional disadvantage for Dutch banks is that while in other countries, people keep their pension plans with the banks, Holland has separate pension funds, who often invest abroad.

Of course banks also run the risk of non-payment of loans. But the government guarantees 80% of all loans up to €320.000 though the National Mortgage Guarantee. If the European debt crisis gets worse, risk for the state will increase even more (Ilargi: The Dutch government already rescued/bought its entire banking system in 2008/2009) [..]

In 1980 Holland and Germany had Europe's lowest homeownership percentages: 42% and 41%. Today the percentage is 54% in Holland and 42% in Germany.

The "mortgage savings accounts" (a Dutch phenomenon) held about €332 at the end of 2011, or half the mortgage debt. They have failed to keep up total debt growth since the mid 1990s. The Dutch people also have relatively high pension savings; they total some €1141 billion, or almost twice the mortgage debt. This does not eliminate mortgage debt, however, since this money is reserved for (future) pensioners, regardless of their debt situation. [..]

Since 2011 banks can only loan out 106% of a home's market value, and the maximum interest-only percentage of a mortgage is 50%. Also, purchase subsidies and starter loans were cancelled.

The report goes on a bit more, but the gist is clear. You may not be overly surprised to learn that my initial reaction when reading it was: Wow wow wow!!. You see, my view is that this constitutes criminal behavior by a government and the banking industry it shares a pillow with. When you make it attractive for people to rack up as much debt as they can, there is only one possible outcome: some form or another of debt slavery.

It's very hard to get any closer to Charles Ponzi and Bernard Madoff than this, but at least those guys were not officially sanctioned by a government. The US subprime boondoggle has absolutely nothing on this; the only difference is that the Dutch real estate market has fallen just some 11% until now, not the 33% and counting in America. But it will, and then some; Charles Ponzi guarantees it on his mother's grave.

To top it off, the Statistics Bureau has the gall to state that total domestic real estate value has increased!. How does that work? Well, you hand everyone who wants it a truckload of free credit, they all buy their neighbor's homes, for which they don't have to pay down any principal, rinse and repeat as often as you can (get away with), and voilà!, everyone's richer. Easy as pie. I'm not joking: that is a pyramid scheme if I ever saw one.

And as I said before, none of this was hardly mentioned at all in the run-up to today's Dutch elections, though the government's very own statistics bureau published the numbers just last week. Truly incredible.

Yeah, I cracked some numbers too, it's probably good to get this into a US perspective.

The US has 314 million inhabitants, 18.8 times as many as Holland, which has 16.7 million (on a plot of land smaller than many if not most US states).

Holland's mortgage debt is €670 billion = $864.3 billion (at today's 1:1.29 rate), times that 18.8 would equal $15,712 trillion, while actual US debt is "only" $10.3 trillion. So Holland's mortgage debt is over 50% worse than America's. Which you thought was bad enough …

That is €670 billion/16.7 million = €40.119 x 1.29 = $51,753 per capita. But only 54% of Dutch people are homeowners (vs 66% of US in 2011).

So 54% of 16.7 million = 9.1 million, carry the €670 billion = $864.3 billion debt, which comes to €73.626 ($94,977) per capita. For young families with 2 children, average(!) debt is €294.504 ($379,908).

And it gets worse: older people have obviously paid off much more on average, plus they have more savings on average. In other words, young families are sitting on highly explosive situations. Through less income, lay-offs, or other negatives, they can lose it all basically overnight (average income in Holland is €32.500 or $42,925).

Also, about those mortgage related savings and investment accounts: what do you think they are invested in? Not government bonds, at 1.x%, that’s for sure. Try risk. Try the stock market. Which rises only when more taxpayer money (including Dutch) is handed to the markets. Running to keep still doesn't do it justice.

With these levels of household debt it would seem obvious that the Dutch are sleepwalking into disaster, but don’t expect them to wake up anytime soon (or their politicians to warn them, apparently). After all, over 80% of mortgages are "insured", so why worry?

However, as is the primary characteristic of why any Ponzi scheme must and will collapse, this one too will run out of – enough – new entrants. And probably already has.

And this is a country that is supposed to pay tens of billions of euros to save its "poorer" cousins through the ESM, the EFSF and the ECB?! Come on!

As I said before, the "richer" countries in Europe need breathing space in order to save themselves. Because they're not nearly as rich as they like to think, and they like to make you think too. It would be far more realistic to let the weaker eurozone countries go, because not doing so risks imploding the entire edifice. And that in turn can and will lead to very ugly consequences.

Europe is a powderkeg in waiting. But don't tell the Dutch that. They like their delusions too much. Then again, don’t we all?


Home Forums Those Dutch Tulips Ain't Looking All That Rosy

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  • #8437

    Well, the German Supreme Court decision is through, and it looks positive at a first superficial glance, so what could go wrong from here? Sorry to br
    [See the full post at: Those Dutch Tulips Ain't Looking All That Rosy]


    In 1980 Holland and Germany had Europe’s lowest homeownership percentages: 42% and 41%. Today the percentage is 54% in Holland and 42% in Germany.

    If you only pay the interest on a mortgage and its tax deductible, I would say that its a good deal for you if you can walk away from the mortgage.

    54% of the people are not homeowners but subsidised renters.


    When does the insanity end. I for one have anticipation fatigue. I read all these news releases, articles, books, and completely agree yet the markets rise and the status quo just keeps going on and just when you think “this is it” a solution as ridiculous as it might be saves the day



    Thanks for that eye-opener about the Netherlands. I was based in Amsterdam in 1980-3. There was a property bubble back then. All the people I worked with were borrowing like crazy. The bubble collapsed soon after I left. A Dutch friend of mine got burnt quite badly. He showed us in the office the very first real PC that I ever had seen – a Commodore 64. It cost over $600 at that time.

    I just did a search and it seems that he is currently running a motorbike club and magazine in Normandy.

    Of course, the current bubble is incomparably bigger and the consequences will be devastating for all concerned. The Dutch have not learnt much since the tulipomania.

    John Day

    Very Sorry for “off topic”.
    this better relates to the hungarians ejecting Monsanto story, but this GMO news just hit today. I’m a physician, MD since 1986. This is important food toxicity information (my essay).
    Successful Mongrels,

    We’ve (most of us) come to accept our relation to other apes. It’s pretty obvious to see.
    We have discovered that we have a lot in common with rats, and can rely on studies which “sacrifice” them instead of people, to further medical knowledge. (No more Dr. Mengele…)
    Of course we’ve heard that we evolved from some primordial spark in the primeval soup kitchen making DNA, which could self replicate and begin this whole fabulous process. That genetic tree did most of it’s branching before multi celled organisms, before plants and animals diverged, and a lot of that early work persists as the foundations of cellular metabolism.
    Consider the structures of chlorophyll and hemoglobin:

    Feeling a bit older?
    You should.
    We have been engineered and re engineered for function and reliability over hundreds of millions of years in the most complex empirical process imaginable, with redundant testing over multiple generations, to study the comparative effectiveness of every little mutation in any single trait. This just exceeds the number of processes we can conceptualize. It’s a googleplex kinda’ number. The stars in the sky…
    Monsanto doesn’t have that kind of time. they have quarterly earnings reports. they want to own the global genome in our lifetimes, stuff like that. Think they might hotwire some stuff without testing it?
    Carbohydrate metabolism in eukaryotic cells has a lot of inter species similarity, because carbohydrates are one of the building block energy groups that go way, way, way back.
    Genetic engineers found that if they blocked a certain carbohydrate metabolic enzyme in wheat, they could stuff the grains with more carbohydrate, more energy, more weight, more profit, more better. They went on ahead and did just that. Big success!
    However, they either did not do, or did not reveal the extremely close relationship of the enzymes they were blocking to enzymes in humans and animals, which also regulate pathways of carbohydrate metabolism. It turns out that a lot of the gene sequences are spot-on, and that this wheat modification can directly block carbohydrate metabolic pathways in the human liver and muscle cells. Glycogen, the human form of stored carbohydrate, is regulated by these ancient plug-and-play similar enzymes, much as the oxygen and CO2 carrying and transfer similarities between heme and chlorophyl persist. When nature finds something that works, it is unlikely to be completely replaced in a complex metabolic system.
    This metabolic poison is in our bodies as we speak.
    Here is the scientific paper, by a Biochemist at the University of Canterbury (nice place) in Christchurch, New Zealand, Jack Heinemann Ph.D.
    Here is some information from Natural News, including press announcements from down-under and an oral explanation by Dr. Heinemann. (They misstate the location of the University of Canterbury.)

    I sure do see a lot of Americans with metabolic problems. Fatty liver is an epidemic. Obesity and diabetes are conditions where the human body stores excess fuel, just like those poor wheat kernels are forced to do. I’m not saying that this one thing is the cause, but Americans didn’t eat or exercise that much differently in the 1970s, and look at the difference now! It is illegal to put any label on any food in America, saying whether it does or doesn’t contain GMOs. It is illegal to distinguish GMO wheat in bulk sales, and it gets mixed. Wheat is wheat, and nobody can say different, at least in the land of the free.
    I am extremely concerned about this from a medical viewpoint,and I have found that I feel better with less wheat in recent decades. Damn, it’s hard to even limit it, let alone eliminate it. I’m trying to devise a strategy. We just don’t have that much rice in our food, and rice doesn’t stick together, or have the protein content of wheat.
    This is merely an EXAMPLE of the sorcerer’s apprentice at work in the realm of life itself. The US laws mean that the apprentice gets to do all he wants, completely in the dark, completely out of any supervision. All adverse effects are simply mysterious, and may be studied from some other angle, which blames fat, diabetic people for watching TV, and eating the cheap food they can afford, but doesn’t do anything to hurt American business.
    Hungary, if you may recall, cast out Monsanto and plowed-under their fields.Is it legal to advertise EXCLUSIVELY HUNGARIAN WHEAT in a product?
    I don’t have a solution, which I can enact today.
    I need to eat food which has absolutely-certain origins, and that is difficult, expensive and restrictive, very restrictive to do.
    Wheat, corn and soy are out, as is anything fattened on them. (Shit!)

    Conflicted Omnivore


    If the Fed is going to buy $40 billion a month in MBS debt, then burn it, just for starters, why should one not buy all the non perishable golden tulips one can? In a centrally planned system, where the planners own the medium of exchange, and set it’s value, with the assistance of the biggest military on earth, deflation is a pretty far fetched concept. These sociopaths are many things, but they are not suicidal. They will prevail, until there is nothing left outside their “compounds” to reign over (Crackup Boom). Then it’s off to their private islands and foreign retreats to regroup.

    Deflation, indeed. Everything I need to get by is on an inflationary trajectory. Gas, tires, mechanic rates, plumbers shop rates,food, rent, electric, clothing, shoes, haircut, bus fare, water bill and even a few things I don’t need like sales taxes, property taxes, revenue bond attachments…Oh, but I will get a new high speed rail, with it’s northern most terminal located in the thriving metropolis of Merced, 250 miles to the south of me, and terminating another 300 miles to the south of that, in “cosmopolitan” Bakersfield. Ha, and they say California is broke! The glass and steel skyscrapers have begun construction, to house another massive bureaucratic institution. Jobs, jobs, jobs. This project will provide so many shovel ready jobs, well, just imagine the prosperity that could be gotten by replacing those shovels with tea spoons.


    Athens citydoes not have winding streets.Athens modern was designed by a German in the 19th C. Its streets are built according to a grid pattern.Somewhat like Manhatten city.Which despite its Native American name was built by uitlander Dutch initially.The Acropolis was built by Athenians per se.Some Turk remnants may also remain.The Greek Royal Family is also of Germanic origin.Like “Phil the Greek” :S .Plus ca change etc.


    John Day –
    THANK YOU for your post. You ended with “Wheat, corn and soy are out, as is anything fattened on them.” Are you suggesting that the enzyme modification can be carried through another species (e.g., a cow “finished” on corn will transmit this DNA or these enzymes to the eater of the cow and that persons metabolism of starch will be reduced)? And are you concerned with the up- and down-regulators of genes (for the non-science geeks among us, I mean like those that may stimulate cell growth and result in cancer or cell death resulting in not having the cells we need to do x job) that we are only beginning to understand which are being moved freely into GMOs?
    “Shit!” indeed!

    Mark T

    Today the world is bedeviled by a a modern day equivalent of alchemy. Those that study this modern day equivalent are called economists. Like many alchemists before them economists hold positions of great power and influence. Their words are listened to by world leaders with reverence and an almost fawning adoration. The emergence of economists is significantly more dangerous to the world than Wizards working in dingy laboratories trying to turn iron into gold. Economists are in the driver seat, pedal to the metal, driving us over a cliff in a manner that would make Thelma and Louise proud.

    The basic alchemy that economists are preaching to the world is that we can keep borrowing more money and printing more money to get our way out of the debt crisis. This theory, like the obsession of turning iron into gold is by any measure of common sense, impossible, stupid, dangerous and absurd. However like any good ‘con job’, the leaders and the general population are a perfect ‘mark’ because they desperately want to believe the myth. The alternative is to accept that developed countries and their baby boomers are going to have to endure years of hard times and a lower standard of living while global debt is paid down, defaulted on and deleveraged.

    Economist or Alconomist


    John Day –
    Please forgive me for being a bit non-educated in biochemistry. After taking a look at the RNA article, it seems that the genetic material would pass through the gut (e.g., of a cow) and then be incorporated into the blood stream of the consumer (i.e., eaters of cow). So, after it is in the blood stream, does it go through cell walls? This makes me wonder about us having portals on the surfaces of our cells that would take in DNA strands. Why would those exist? In basic biology, we are taught that the DNA processes in a cell are isolated and we don’t need DNA or RNA swapping among cells. But if the receptors are triggered and and micro-pores open and let it pass, I would imagine that it’s some type of vitally important communication system – one that we are junking up with crappy GMO genetic info, just like we are really junking it up with crappy endocrine disruptors.
    (People aren’t in the street with pitchforks, why?)


    Pardon my simplified understanding of the EU situation, but isnt it a case of a complex society not having enough energy to support the complexity, and tryimg to solve this problem with more complexity, which creates the completely dreamlike situation we are in with greece and others?

    My solution would be to start farming again, make sure everyone can eat, then see how much is left over for complex activities.

    Ken Barrows

    “because bad news makes politicians and central bankers hand out the people’s money and checkbooks”

    I need some clarification here. Isn’t it really the politicians who hand out the people’s money and checkbooks (i.e. borrow from the future)? Don’t the central banks succeed or fail on one criterion: inflation? If central banks cannot inflate successfully because deflation is too strong, then aren’t they just playing with themselves? And when the central banks fail, won’t the politicians who have borrowed from the future have to deal with the collapse of plummeting living standards?


    Ken, I agree, it’s all confusing. The way I read it, the Federal Reserve is owned by it’s member banks. These banks also, for the most part, own the Congress and the members of the Executive Branch. Thereby, also being highly influential in the selection of the Judicial and Military hierarchy. Enter also, their direct control over the corporate means of finance and welfare. It’s a closed loop. This ol’ boy had it down many moons ago;

    “I believe that banking institutions are more dangerous to our liberties than standing armies…” Thomas Jefferson

    Only thing I would add is “Standing armies are also, indirectly, banker owned and operated” but he probably knew that.

    Now, keep in mind, that statement was made back before Thomas had an SUV to fill up.

    Couple lessons I’ve gleaned over the years. A. The worlds banking systems are in it for themselves. B. Love ’em or hate ’em, BUT DO NOT FIGHT THEM! For the very currencies the world operates on are solely owned by them. Case in point? Read what it says at the top of the President side of a dollar bill.

    All said, I don’t for a second believe they would ever passively allow deflation to take root, in a digital age of finance/credit/money creation. It’s as simple as crediting every EBT, ATM, Social Security account, Checking account, Master card and American Express card with a $50,000 “rebate”, and free kibbles for Rex. I’ll also add here, I believe we are in the developing stages of von Mises “Crackup Boom.”

    In their (TPTB) eyes, I would surmise, the more they “print” the higher precious commodity prices rise, the more “deadwood” is taken out of the consumption markets, leaving what’s left to the “essential personnel” of the world, ie. governments and friends of governments.

    In light of my rantings above, I suggest many pundits have the cart before the horse these days, in that, I see rampant inflation first, then, as all systems break down, deflation, in the sense that the currency and it’s creators are dethroned, and some other wild, man made ruling concoction is enthroned. Wash, rinse, yada, yada.

    May we only hope the bankers don’t deploy “their” ICBM’s in this process.


    Ilargi, thanks for that piece. My hopes for an expedient reform of the dutch housing market were dashed when I read this newest proposal for a phase-out of interest deductability (in dutch);

    Here’s an analysis of the economic effects of several deductability phase-out scenario’s (in dutch):

    Sadly, its still the most ambitious reform proposal of the dutch housing market in decades, afforded by recent concessions for abandoning the deductability scheme by political parties traditionally loyal to this system.

    Besides making the assumption that economic growth will simply resume by 2015, this reform proposal seeks to gradually phase-out the interest deductability within 30 years, or slightly sooner within 15 years, so as to avoid drastic price-shocks. Since much of the overvaluation is caused by the current fiscal deductability of interest, it is presumed that house prices will drop too violently if said deductability is abolished all at once. The plan also presumes that during the long phase-out, any fall in homeowners purchasing power by increased mortgage payments will be compensated for by lowering the general tax burden of homeowners.
    The plan doesn’t actually acknowledge that house prices and accompanying oversized mortgages are structurally unsustainable, and seeks to stabilise prices at current levels by financing overvaluation by other means.
    The phased-out deductability is to be replaced by other price-distorting subsidies, the affordability gap between renting and buying is to be closed by forcing a rise in rents, to be used for financing the new subsidy mechanisms for homeowners and supposedly inticing renters to buy.

    If sustainable, unbubbly house prices normally fluctuate between 4-5 times median income, and if dutch median income would remain about €30,000, the average price of homes must drop by another 25% to become generally affordable. Its difficult to do this without collapsing the pyramidal leverage of overvalued home equity integrated into the financial and credit system.


    It turns into a world of property skirmishes with the Fed providing credit to buy out the distressed assets of the globe. As you noted hungary and greece are the first feeding frenzys for the economic jackal$. Economic terrorism. Germany more or less had to agree to QE to provide another bidder before the funded 1% bought the crashing european assets for cents in the euro.
    see auroraaustraliis blog


    for John Day et al re 5210,
    buy certified biodynamic wheat and produce. Their genetics are as good as Nature can offer. Though no doubt saying this will put such farmers/certifiers/distributors the line of fire, like Hungary.

    John Day

    Apologies to RWG for such tardiness.
    I work 12 hr shifts Friday and Saturday. Pays kid’s tuition…
    I dredged through the technical paper, and it was dredging for me, since there is a lot of specific terminology, explained once, then used repeatedly.
    The RNA is the controller in this genetic engineering scheme, and it controls other metabolic processes in the targeted enzyme systems within the cells.
    human glycogen metabolism is very much like carbohydrate metabolism in the wheat seeds. Nature has preserved many of the important segments of genetic code, which create specific lock and key type interactions in these enzymes and their controllers.
    The specific targets of this genetic engineering remain trade secrets, but in computer modeling, many potential sites for such function were identified from general wheat and human genomic information.
    there are many ways for a wheat enzyme controller to interact with human enzymes, and for these effects to be genetically carried down in subsequent generations of cells, once one (liver for instance) cell takes up the controller RNA.
    That is particularly worrisome, that there is a real potential for these controllers to be carried down in cell generations, providing cumulative metabolic toxicity.
    These small loops of RNA are heat stable, and survive gut acids and have been seen to get into cells in animal models. therefore, they can get into human cells through the gut, after surviving cooking. If they existed in bovine cells, consumed as hamburger, it seems that they would still survive cooking and digestion.
    This is so very concerning that I broke protocol to put it up.
    thank you all for being understanding.

    Markii, I am unfamiliar with “Certified Biodynamic” products. I’m not sure they exist in the US. I am interested.


    To John Day

    Thanks for your continued explanation of GM wheat. Very interesting.

    In reading your links to the various articles I noted one thing.

    You said: “Here is some information from Natural News, including press announcements from down-under and an oral explanation by Dr. Heinemann. (They misstate the location of the University of Canterbury.)”

    It’s a good article, but I noted one very important paragraph.

    “CLARIFICATION: This note was added after initial publication to help clarify the status of GM wheat. Currently, GM wheat is not commercialized. It’s not yet found in everyday foods. But the GMO industry is trying to commercialize it while skipping any real safety testing and buying off regulators to declare it safe. GM corn, of course, is already widely used in foods, as is GM soy. But GM wheat is not yet in the food supply. If we don’t resist the domination of the biotech industry, however, it soon will be.”

    So the upshot is to avoid corn and soy at this point, but to keep alert to wheat being sold that’s GM wheat.

    I’m really horrified that more rules aren’t in place protecting the public from these food practices with out many studies proving the safety of modified foods.



    First of all, I don’t trust official narratives. When I analyze them in depth, not only are they wrong, but they are 180 degrees wrong.

    So let’s set the narrative aside and go by our own observation.

    Sorry, but words are important here. “Print” is a very bad word to describe what is happening. Rather, they are issuing credit, the proceeds of which go to the insider banking institutions and, in return, society gets worthless and/or toxic trash MBSes.

    That’s not printing, that’s theft – in broad daylight. The inside banksters get the money, society eats their losses. Now you know why they held all those homes off the market in-spite of being empty. Now that the Fed owns them – and tax payers are on the hook for Fed losses – we’ll see what happens.

    Make no mistake, though, they know the economy can’t be fixed and they aren’t trying. They are loading up on cash and offloading their debt. Inflating prices is due to all this free money being showered on the gambling class. Whatever is going up is pretty much the speculative assets these people wager on.

    So, let’s call it what it is – government sanctioned looting of society to benefit Big Finance Capital that *controls* the mega banks and the Federal Reserve System (ownership is a red herring – *control* is everything that matters).

    Now, if you were going to hyperinflate, would your front mega banks be loaning 30 year money at 3.5%? Would you hyperinflate while you owned trillions in cash and debt assets?

    Only a moron would do that – and I’m convinced the people looting us are not morons. They know what they are doing.

    They won’t hyperinflate until after they’ve busted everyone else – most likely in a deflationary depression. That’s when they take the trillions they’ve looted, along with all their debt paper and cash it in for our hard assets that we’ve spent generations building in a debt money fraudulent system.

    When they own reality, all bets are off. Then hyperinflation will balance their books, IMHO.

    The narrative is a sucker punch. Even the “opposition” narrative.

    “The best way to control the opposition is to lead it.”
    ~Vladimir Lenin (a popper compared to the people running Huxley’s Ultimate Revolution)


    Regarding GMO,

    Jeffrey M. Smith’s hot off the press documentary, “Genetic Roulette,” is available to view for free over the next week or so.

    The same criminals who have rigged the monetary system to blow up in your face have also rigged the food supply.

    Not to mention the water supply:


    Impact of Fluoride on Neurological Development in Children

    “Fluoride seems to fit in with lead, mercury, and other poisons that cause chemical brain drain,” Grandjean says

    Think dementia on the instalment plan – and that is if you lucky.

    Note that no real science has showed any benefits to putting this toxic wate fluorosilicic acid, and a myriad of related toxins, into our drinking water. No randomized, double blind placebo study has ever been published… Ever.

    That’s how you hide the truth and cover for lies.

    Fluoride Deception

    Formerly T-Bear

    How geranium is it that tulips aren’t rosy?

    Have you a supply of brain-bleach after offering Geert Wilders picture twice? His Mom should be only so proud of that one.

    Are there any requirements for relevancy in comments, looking at Trivial4TW’s last offering which detract from the value of TAE. Fluoride poisoning indeed, went out with the John Birch Society, recommend getting a life and stifling until that is accomplished. Next thing on such agenda is ‘trickle down economics’ is something other than some cheating eejit higher than you on the social ladder pissing down on you.

    Viscount St. Albans

    Re: Fluoride

    It sounds to me like an international conspiracy to sap and impurify all of our precious bodily fluids.

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