The History of Central Banks - Part 2 (1791 - 1865)

What is a Central Bank? 

How did it evolve and what is their place in our economy?

To understand why there is a push to end the US Federal Reserve in the Occupy Wall Street movement we must understand the history behind the Central Banks.

Yesterday we presented The History of Central Banks - Part 1 (48 B.C. - 1791 A.D.)

In this installment, Part 2, we look at the period from 1791 (when the first Central Bank was established in the United States) to 1865 when President Lincoln was assassinated (and Silver was demonetized).

But first, let's pick up from where we were ending yesterday...

1781 (The Central Bank comes to America)

Towards the end of the American Revolution the Continental Congress were desperate for money, so they allowed Robert Morris, their Financial Superintendent, to open a privately owned central bank, in the hope this would sort out the money problem.

Morris was a wealthy man who had grown wealthier during the revolution by trading in war materials.

This first central bank in America was called the Bank of North America, which was set up with a four year charter, and was closely modeled after the Bank of England. It was allowed to practice the fraudulent system of fractional reserve banking, so it could create money it didn't have, then charge interest on it.

The bank's charter called for private investors to put up $400,000 of initial capital, which Morris found himself unable to raise. Nevertheless he unashamedly used his political influence to have gold deposited in the bank, which had been loaned to America by France. Morris then loaned the money he needed to buy this bank from this deposit of gold that belonged to the government, or rather the American people.

This Bank of North America, again deceptively named so the common people would believe it was under the control of the government, was given a monopoly over the national currency.

1785

Despite the promises of Robert Morris that his privately owned Bank of North America would solve the problem with the money supply, of course the economy continued to plummet, forcing the Continental Congress not to renew the bank's charter.

The leader of the effort to kill this bank was William Findlay of Pennsylvania, who stated,

"This institution, having no principle but that of avarice, will never be varied in its objective...to engross all the wealth, power and influence of the state."

1787

Colonial leaders assemble in Philadelphia to replace the Articles of Confederation with the Constitution.

Governor Morris headed the final draft of the Constitution and he knew the motivation of the bankers well as he had once worked for them. Governor Morris along with his former boss Robert Morris, and Alexander Hamilton had presented the original plan for the Bank of North America to the Continental Congress, in the final year of the Revolution.

Fortunately Governor Morris by this time had discovered his conscience, defected from Robert Morris, and in a letter to James Madison dated July 2nd of this year he stated,

"The rich will strive to establish their dominion and enslave the rest. They always did. They always will...They will have the same effect here as elsewhere, if we do not, by the power of government, keep them in their proper spheres."

James Madison was opposed to a privately owned central bank after seeing the exploitation of the people by the Bank of England. Thomas Jefferson was also against it, and Jefferson later made the following statement,

"If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and the corporations which grow up around them will deprive the people of all property until their children wake up homeless on the continent their fathers conquered."

Sadly the words of wisdom of Governor Morris and Thomas Jefferson fell on deaf ears. Alexander Hamilton, Robert Morris and Thomas Wyling, convinced the the bulk of the delegates to this Constitutional convention, not to give Congress the power to issue paper money.

They were aware that most of these delegates were still reeling from the wild inflation of the paper money during the revolution.

These delegates also had short memories and didn't remember how well Colonial Scrip had worked before the war, or Benjamin Franklin's words of wisdom in 1764.

As a result the Constitution was silent on the issue of paper money by the Government for the citizens, leaving a wide open door for money changers in the future.

1790

Less than 3 years after the Constitution had been signed, the newly appointed First Secretary of the Treasury, Alexander Hamilton, proposed a bill to the Congress calling for a new privately owned central bank.

Interestingly, Alexander Hamilton's first job after graduating from law school in 1782 was as an aide to Robert Morris, a man who he had written to in 1781 stating, "a national debt if it is not excessive will be to us a national blessing."

1791

The three main players behind the Bank Of North America were: Robert Morris; Alexander Hamilton; and the Bank's President, Thomas Willing. 

These men did not give up and Alexander Hamilton, now Secretary of the Treasury, a man who described Robert Morris as his, "mentor," managed to get a new privately owned central bank through the new Congress.

This new bank was called the, "First Bank of the United States," and was exactly the same as the Bank of North America. Robert Morris controlled it, Thomas Willing was the Bank's President, only the name had changed.

This bank came into being after a year of intense debate and was given a 20 year charter. It was given a monopoly on printing United States currency even though 80% of it's stock was held by private investors. The other 20% was purchased by the United States government, but this was not to give it a piece if the action, but to provide the capital for the private investors to purchase the other 80%.

As with the Bank of England and the old Bank of North America, these private investors never paid the full agreed amount for their shares. What happened was through the fraudulent system of fractional reserve banking, the government's 20% stake which was $2,000,000 in cash, was used to make loans to its private investors to purchase the other 80% stake, £8,000,000, for this risk free investment.

Again like the Bank of England and the old Bank of North America, the name, "First Bank of the United States," was deliberately chosen to hide from the common people the fact that it was privately owned. The names of the investors in this bank were never revealed, although it is now widely believed that the Rothschilds were behind it.

Interestingly in 1790 when Alexander Hamilton proposed this bank in Congress, Mayer Amschel Rothschild made the following statement from his bank in Frankfurt, Germany,

"Let me issue and control a nation's money and I care not who writes the laws."

1796 

The First Bank of the United States had been controlling the American money supply for 5 years.

During this time the American Government has borrowed $8,200,000 from this Central Bank, and prices in the country have increased by 72%. In relation to this, Thomas Jefferson, then Secretary of State stated:

• "I wish it were possible to obtain a single amendment to our constitution taking from the Federal Government their power of borrowing."

1798

Mayer Amschel Rothschild sends his son, Nathan, at the age of 21, to England with a sum of money equivalent to £20,000, to set up a money changers there.

1800

In France, the Bank of France was set up.

However Napoleon decided France had to break free of the debt and he therefore never trusted this bank. He declared that when a government is dependent on bankers for money, it is the bankers and not the government leaders that are in control.

Napoleon said:

• "The hand that gives is among the hand that takes. Money has no motherland, financiers are without patriotism and without decency, their sole object is gain."

1803

Thomas Jefferson was now US President and President Jefferson struck a deal with Napoleon in France.

The United States would give Napoleon $3,000,000 of gold in exchange for a huge chunk of territory west of the Mississippi River. This was called the Louisiana purchase.

Napoleon used this gold to put together an army. He then used this army to set off across Europe where he began to conquer everything in his path.

The Bank of England quickly rose to oppose Napoleon and financed every nation in his path, profiteering from the war.

Prussia, Austria, and then finally Russia all went heavily into debt in a futile attempt to stop Napoleon.

1807

30 year old Nathan Rothschild, head of the English branch of the family in London, personally takes charge of a plan to smuggle a much needed shipment of gold through France to Spain to finance an attack by the Duke Of Wellington on Napoleon.

1811 

A bill was put before Congress to renew the charter of the First Bank of the United States.

The legislatures of both Pennsylvania and Virginia pass resolutions asking Congress to kill the bank. The national press openly attack the bank calling it: a great swindle; a vulture; a viper; and a cobra.

Nathan Rothschild gets in on the act and makes the following revealing statement as to who was really behind the First Bank of the United States:

• “Either the application for renewal of the charter is granted, or the United States will find itself involved in a most disastrous war.”

When the smoke had cleared the renewal bill was cleared by a single vote in the house and was deadlocked in the Senate.

At this point America's fourth President, President James Madison was in the White House. He was a staunch opponent of the bank and he sent his Vice-President, George Clinton, to break a tie in the Senate which killed the bank.

1812 

As promised by Nathan Rothschild, because the charter for the First Bank of the United States was not renewed, the British attack America.

However, as the British are still busy fighting Napoleon, they are unable to mount much of an assault and the war ends in 1814.

1814

Wellington's attacks from the South and other defeats eventually forced Napoleon to abdicate and Louis XVIII is crowned King.

Napoleon is exiled to the tiny island of Elba, off the coast of Italy.

1815

Napoleon escapes his exile and returns to Paris. French troops are sent to capture him, but he uses his charisma to convince these soldiers to rally round him, and they subsequently hail him as their emperor once again.

In March, Napoleon assembles an army which England's Duke of Wellington defeated less than 90 days later at Waterloo.

Even though the outcome is predetermined, Nathan Rothschild sent a trusted courier named Rothworth to Waterloo where he stayed on the edge of the battlefield. Once the battle was decided, Rothworth took off for the Channel, and delivered the news of Wellington's victory to Nathan Rothschild a full 24 hours before Wellington's own courier.

Nathan Rothschild hurried to the London Stock market and stood in his usual position. All eyes were on him as Rothschild had a legendary communications network. Rothschild stood there looking forlorn and suddenly started selling. The other traders believed that this meant he had heard that Napoleon had won so they all started selling frantically.

The market subsequently plummeted, soon everyone was selling their consuls (British Government Bonds), but then Rothschild secretly started buying them all up through his agents on the floor, for a fraction of what they were worth only hours before.

A lot of these consuls were able to be converted to Bank of England stock, which is how Rothschild took over the control of the Bank of England and therefore the British money supply.

Interestingly, 100 years later, the New York Times ran a story stating that Nathan Rothschild's grandson had attempted to secure a court order to suppress a book on this story. The Rothschild family claimed the story was untrue and libelous, but the court denied the Rothschilds request and ordered the family to pay all court costs.

Nathan Rothschild was quoted as openly bragging that in his 17 years in England he had increased his initial £20,000 stake given to him by his father, 2500 times to £50,000,000.

It was during this time that the Central Bankers earned the reputation for funding wars from both sides of a dispute.

During the period between the founding of the Bank of England in 1694 and Napoleon's defeat at Waterloo this year, England had been at war for 56 years, with much of the remaining time spent preparing for war.

And during that entire time, Central Bankers profited mightily from it.

1816

The American Congress passes a bill permitting yet another privately owned central bank. This bank was called the, "Second Bank of the United States," and it's charter was a carbon copy of that of its predecessor, the First Bank of the United States.

The United States government would once again supposedly own 20% of the shares of the bank.

Their share was again paid up front into the bank and thanks to fractional reserve lending, this was transformed into loans to the private investors who once again purchased the remaining 80% of the shares.

Just as before the names of these investors was kept a secret.

1826

The talley stick is taken out of circulation in England.

1828

After 12 years during which the Second Bank of the United State ruthlessly manipulated the American economy to the detriment of the people but to the benefit of their own money grabbing ends, the American people had unsurprisingly had enough.

Opponents of this bank nominated Senator Andrew Jackson of Tennessee to run for President.

To the dismay of the money changers, Jackson won the Presidency and made it quite clear he intended to kill this bank at his first opportunity.

He started out during his first term in office, to root out the banks many minions from government service. To illustrate how deep this cancer was rooted in government, he fired 2,000 of the 11,000 employees of the Federal Government.

1832

The Second Bank of the United States asked Congress to pass a renewal of the bank's charter, four years early.

Congress complied and sent the bill to President Jackson for signing.

President Jackson vetoed this bill and in his veto message he stated the following:

• "It is not our own citizens only who are to receive the bounty of our Government. More than eight millions of the stock of the Bank are held by foreigners...Is there no danger to out liberty and independence in a bank that in its nature has so little to bind it to our country?"
  
  "Controlling our currency, receiving our public moneys, and holding thousands of our citizens in dependence... would be more formidable and dangerous than a military power of the enemy. If government would confine itself to equal protection, and, as Heaven does its rains, shower the favor alike on the high and the low, the rich and the poor, it would be an unqualified blessing."
  
  "In the act before me there seems to be wide and unnecessary departure from these just principles."

In July, Congress was unable to override President Jackson's veto.

President Jackson then stood for re-election and for the first time in American history he took his argument directly to the people by taking his re-election campaign on the road. His campaign slogan was, "Jackson And No Bank!"

Even though the bankers poured over $3,000,000 into President Jackson's opponent, the Republican, Senator Henry Clays' campaign, President Jackson was re-elected by a landslide in November.

President Jackson knew the battle was only beginning however, and following his victory he stated:

• "The hydra of corruption is only scotched, not dead!"

1833

President Jackson appoints Roger B. Taney as Secretary of State for the Treasury, with instructions to start removing the government's deposits from the Second Bank of the United States.

President Jackson's previous two Secretaries of State for the Treasury, William J. Duane and Louis McLane had both refused to comply with President Jackson's request and were fired as a result.

The head of the Second Bank of the United States, Nicholas Biddle, starts to use his influence to get the Senate to reject Roger B. Taney's nomination and even threatened to cause a depression if the Bank was not re-chartered. Biddle stated:

• "This worthy President thinks that because he has scalped Indians and imprisoned judges, he is to have his way with the Bank. He is mistaken."

Biddle then went on to brazenly admit that the bank was intending to make money scarce in order to force the hand of Congress into re-chartering the bank. He stated:

• "Nothing but widespread suffering will produce any effect on Congress...Our only safety is pursuing a steady course of firm restriction - and I have no doubt that such a course will ultimately lead to restoration of the currency and re-charter of the Bank."

What Biddle has done with that statement is prove to the world what central banks were really about.

He made good on his word and the Second Bank of the United States sharply contracted the money supply by calling in old loans and refusing to issue new ones. Naturally a financial panic ensued, followed by America being plunged into a deep depression.

Biddle then unashamedly blamed President Jackson for the crash, claiming that it was Jackson's withdrawal of federal funds that had caused it.

This crash plunged wages and prices, unemployment soared along with business bankruptcies. The United States was in uproar and newspaper editors blasted the President in editorials.

1835

Congress assembled what was called the, "Panic Session," and on March 27 President Jackson was officially censured by Congress for withdrawing funds from the Second Bank of the United States, in a vote which passed the Senate by 26 to 20.

It was the first time a President had ever been censured by Congress and Jackson stated of the Bank:

• "You are a den of thieves vipers, and I intend to rout you out, and by the Eternal God, I will rout you out."

Pennsylvania Governor, George Wolf, came out in support of President Jackson and strongly criticized the Bank. This, coupled with the fact that Nicholas Biddle had been caught boasting in public about the bank's plan to crash the American economy caused a shift in opinion of President Jackson's action.

In a complete about turn on April 4, the House of Representatives voted 134 to 82 against re-chartering the bank. This was followed by another strong vote which established a special committee to investigate whether the Bank had caused the crash.

When the investigating committee arrived at the bank's door in Philadelphia with a subpoena authorizing them to inspect the books, Nicholas Biddle refused to give them up, or allow inspection of correspondence with Congressmen relating to their personal loans and advancements he had made to them. He also refused to testify before the committee back in Washington.

1836

The Charter for the Second Bank of the United States expired and the Bank ceased functioning as America's central bank. Nicholas Biddle was later arrested and charged with fraud. He was tried and acquitted but died in 1844 still battling civil suits.

1838

On January 8th President Jackson pays off the final installment of the national debt, which had been necessitated by allowing the banks to issue currency for government bonds rather than simply issuing treasury notes without such debt.

He was the only President to ever pay off the debt.

On January 30th an assassin called Richard Lawrence tried to shoot President Jackson, but both pistols misfired. Lawrence was later found not guilty by reason of insanity. However, after his release he openly bragged that powerful people in Europe had put him up to the task and promised to protect him if he were caught.

When asked what his most important accomplishment had been in life, President Jackson stated without hesitation:

• "I killed the Bank!"

The United States would now go 75 years without a Central Bank.

1850

Jacob (James) Rothschild in France is said to be worth 600 million francs, which at the time was 150 million francs more than all the other bankers in France put together.

1852

Future British Prime Minister, William Gladstone, stated the following about when he became Chancellor of the Exchequer this year:

• "From the time I took office as Chancellor of the Exchequer, I began to learn that the State held, in the face of the Bank and the City, an essentially false position as to finance. The Government itself was not to be a substantive power, but was to leave the Money Power supreme and unquestioned."

1861

One month after the inauguration of President Abraham Lincoln, the American Civil War got underway at Fort Sumter, South Carolina, after South Carolina left the Union.

Slavery has always been cited as the cause of the war but this was simply not the case.

The real reason for the war is that the Southern States were in an a dire economic situation due to the actions of the Northern States. Northern industrialists had used trade tariffs to prevent the Southern States from buying cheaper European goods. Europe subsequently retaliated by stopping cotton imports from the South. Thus the South were being forced to pay more for goods whilst having their income slashed.

As President Lincoln himself stated:

• "I have no purpose directly or indirectly to interfere with the institution of slavery in the state where it now exists. I believe I have no lawful right to do so, and I have no inclination to do so...My paramount objective is to save the Union and it is not either to save or destroy slavery. If I could save the Union without freeing any slave, I would do it."

This is when the money changers saw the opportunity to divide and conquer America by plunging it into Civil War.

This is confirmed by Otto Von Bismarck when he was Chancellor of Germany (1871 - 1890), who stated:

• "The division of the United States into federations of equal force was decided long before the Civil War by the high financial powers of Europe, these bankers were afraid that the United States if they remained as one block and as one nation, would attain economic and financial independence which would upset their financial domination over the world."

Only months after these first shots in South Carolina, the Central bankers loaned, Napoleon III of France (the Napoleon of the battle of Waterloo's nephew), 210 million francs to seize Mexico and then station troops along the Southern border of the United States. By taking advantage of the American Civil War, they hoped  to return Mexico to colonial rule.

This act was in violation of the "Monroe Doctrine," which was issued by President James Monroe during his seventh annual State of the Union address to Congress in 1823.

This doctrine proclaimed the United States' opinion that European powers should no longer colonize the Americas or interfere with the affairs of sovereign nations located in the Americas, such as the United States, Mexico, and others.

In return, the United States planned to stay neutral in wars between European powers and in wars between a European power and its colonies.

If a breach of this protocol were to occur in the Americas, the U.S. would view such action as hostile toward itself.

Whilst the French were breaching the, Monroe Doctrine in Mexico, the British followed suit by moving 11,000 troops into Canada and positioning them along America's Northern border.

President Lincoln knew he was in trouble, so he went with his Secretary To The Treasury, Salomon P. Chase, to New York to apply for the loans necessary to fund America's defense.

The money changers had engineered the war to make the Union fail, and were not about to save it now, so they offered loans at 24% to 36% interest.

President Lincoln declined this as they knew he would and returned to Washington, where he sent for Colonel Dick Taylor of Chicago, who he put in charge of the problem of how he should finance the war.

During one meeting President Lincoln asked Colonel Taylor what proposals he had come up with to finance the war. Colonel Taylor stated:

• "Why Lincoln, that is easy, just get Congress to pass a bill authorizing the printing of full legal tender treasury notes...and pay your soldiers with them and go ahead and win your war with them also."

President Lincoln asked Colonel Taylor if the people of the United States would accept the notes, Colonel Taylor said:

• "The people or anyone else will not have any choice in the matter, if you make them full legal tender. They will have the full sanction of the government and be just as good as any money, as Congress is given that express right by the Constitution."

1862

President Lincoln began the printing of $450,000,000 worth of new bills. These bills were printed in green ink on the reverse side, in order to distinguish them from other bills in circulation, and were called, "Greenbacks." These were printed at no interest to the Federal Government and were used to pay the troops and purchase their supplies.

President Lincoln would be the last President to issue debt free United States notes, and on this subject he stated:

• "The Government should create, issue and circulate all the currency and credit needed to satisfy the spending power of the Government and the buying power of consumers. The privilege of creating and issuing money is not only the supreme prerogative of Government, but it is in the Government's greatest creative opportunity. By the adoption of these principles...the taxpayers will be saved immense sums of interest. Money will cease to be master and become the servant of humanity."

In response to this statement, The Times of London publishes a propaganda piece obviously put out by the bankers, containing the following statement:

• "If that mischievous financial policy, which had its origin in the North American Republic, should become indurated down to a fixture, then that government will furnish its own money without cost. It will pay off debts and be without a debt. It will have all the money necessary to carry on its commerce."
  
  "It will become prosperous beyond precedent in the history of civilized governments of the world. The brains and the wealth of all countries will go to North America. That government must be destroyed or it will destroy every monarchy on the globe."

1863

The bankers struck back. With President Lincoln needing further congressional authority to issue more Greenbacks, Lincoln was forced into allowing the bankers to push their, "National Banking Act," through Congress.

The most important part of this Act was that from now on, the entire United States money supply would be created out of debt by the National Banks buying United States Government Bonds and issuing them for reserves for banknotes. On top of this monopoly, the National Banks were allowed to operate under a virtual tax free status. This banking scam is best explained by historian, John Kenneth Galbraith, who stated:

• "In numerous years following the war, the Federal Government ran a heavy surplus. It could not however pay off its debt, retire its securities, because to do so meant there would be no bonds to back the national bank notes. To pay off the debt was to destroy the money supply."

Later this year, Tsar Alexander II gave President Lincoln some unexpected help. The Tsar issued orders that if either England or France actively intervened in the American Civil War, and help the South, Russia would consider such action a declaration of war. To show that he wasn't messing about, he sent part of his Pacific Fleet to port in San Francisco.

This wasn't because the Tsar was benevolent towards America, instead he was very clever. He, like Otto Von Bismarck in Germany, could clearly see what the money changers were up to, indeed he had already refused to let them set up a Central Bank in Russia. He understood if America was to come under the control of Britain or France, then America would be under the control of Central Bankers once again, and such an expansion of the bankers empire, would mean they would eventually threaten Russia.

1864

President Lincoln is re-elected on November 8th and on November 21 he wrote a friend the following:

• "The money power preys upon the nations in times of peace and conspires against it in times of adversity. It is more despotic than monarchy, more insolent than autocracy, more selfish than bureaucracy."

Salomon P Chase, now President Lincoln's Former Secretary To The Treasury, stated:

• "My agency in promoting the passage of the National Banking Act was the greatest financial mistake in my life. It has built up a monopoly which affects every interest in the country."

1865

On April 14th, 41 days after his second inauguration, and just 5 days after General Lee surrendered to General Grant at Appomattox, President Lincoln is shot by John Wilkes Booth, at Ford's Theater. He would later die of his injuries.

Subsequent allegations that international bankers were responsible for President Lincoln's assassination, would be made in the Canadian House of Commons, nearly 70 years later in 1934.

The person who revealed this was a Canadian Attorney, Gerald G. McGeer. He had obtained evidence deleted from the public record provided to him by Secret Service Agents at the trial of John Wilkes Booth, after Booth's death.

McGeer stated that it showed that John Wilkes Booth was a mercenary working for the international bankers. His speech would be reported in an article in the Vancouver Sun, dated, 2nd May 1934, which stated:

• "Abraham Lincoln, the murdered emancipator of the slaves, was assassinated through the machinations of a group representative of the International Bankers, who feared the United States President's National Credit ambitions. There was only one group in the world at that time who had any reason to desire the death of Lincoln. They were the men opposed to his national currency program and who had fought him throughout the whole Civil War on his policy of Greenback currency."

Gerald G. McGeer also stated that Lincoln's assassination was not purely because the International Bankers wanted to re-establish a central bank in America, but also because they wanted to base America's currency on gold, which they of course controlled. They wanted to put America on a Gold Standard. This was in direct opposition to President Lincoln's policy of issuing Greenbacks, based solely on the good faith and credit of the United States.

The Vancouver Sun article also quoted Gerald G. McGeer with the following statement:

• "They were the men interested in the establishment of the Gold Standard and the right of the bankers to manage the currency and credit of every nation in the world. With Lincoln out of the way they were able to proceed with that plan and did proceed with it in the United States. Within 8 years after Lincoln's assassination, silver was demonetized and the Gold Standard system set up in the United States."

This control of Gold and any proposed Gold Standard is why many believe a return to a Gold Standard is not the solution needed for our current economic woes in 2011.


Next up will be Part 3 (1865 - 1913) which will detail the establishment of the US Federal Reserve.

==================

Email: village_whisperer@live.ca
Click 'comments' below to contribute to this post.

Please read disclaimer at bottom of blog.

The History of Central Banks - Part 1 (48 B.C. - 1791 A.D.)

A great many people believe the current crisis we are in is a direct result of the playing out of the debt-based monetary system and the scourge of Central Banks in our society.

A battle over the place and power of a central bank in America has rumbled throughout U.S. history.

It has pitted capitalists against populists who feared the wealthy few would hog power and crush liberty. The skirmishing has resurfaced amid the current credit crackup, with book after book faulting the Federal Reserve for allowing Americans to run up some $34 trillion in domestic non-financial debt.    

But most people have no idea what the Central Bank is and what role they play in our economy.

US Republican Presidential Candidate Ron Paul has vowed to end the Central Bank and has written a book about it.

But what is the Central Bank? 

How did it evolve and what is their place in our economy?

To understand why there is a push to end the US Federal Reserve we must understand the history behind the Central Banks.  That's what this series will be about.  The content is adapted from a history written by Andrew Carrington.

It will be long and broken down into multiple parts, but I hope you will take the time to read through it all.

In this first installment we look at the period from 48 BC to the introduction of the first Central Bank in the United States in 1791, the Bank of North America.

Central Banks sprung from the money changers of the time, so we start with them.

(Click on all images to enlarge)

48 B.C.

We can find reference to the money changers in the time of Julius Ceasar.

Julius Caesar took back from the money changers the power to coin money and then minted coins for the benefit of all. With this new, plentiful supply of money, he established many massive construction projects and built great public works. By making money plentiful, Caesar won the love of the common people.

But the money changers hated him for it and this is why Caesar was assassinated. Immediately after his assassination came the demise of plentiful money in Rome, taxes increased, as did corruption.

Eventually the Roman money supply was reduced by 90%, which resulted in the common people losing their lands and homes.

The growth and contraction of the money supply is a common theme throughout economic history.

30 A.D.

We next find reference to the money changers in the Bible in the time of Jesus Christ.

When Jews came to Jerusalem to pay their Temple tax, they could only pay it with a special coin, the half-shekel. This was a half-ounce of pure silver, about the size of a quarter. It was the only coin at that time which was pure silver and of assured weight, without the image of a pagan Emperor, and therefore to the Jews it was the only coin acceptable to God.

Unfortunately these coins were not plentiful, the money changers had cornered the market on them, and so they raised the price of them to whatever the market could bear. They used their monopoly they had on these coins to make exorbitant profits, forcing the Jews to pay whatever these money changers demanded.

Jesus Christ in the last year of his life uses physical force to throw the money changers out of the temple. He threw the money changers out as their monopoly on these coins totally violated the sanctity of God's house. These money changers called for his death days later.

1024

The money changers had control of Medieval England's money supply and at this time were generally known as goldsmiths.

This is when the concept of paper money started out.

Paper money was simply a receipt you would get after depositing gold with a goldsmith, in their safe rooms or vaults.

This paper started being traded as it was far more convenient than carrying around a lot of heavy gold and silver coins.

Over time, to simplify the process, the receipts were made to the bearer, rather than to the individual depositor, making it readily transferable without the need for a signature. This broke the tie to any identifiable deposit of gold.

Eventually the goldsmiths recognized that only a fraction of depositors ever came in and demanded their gold at any one time, so they found out how they could cheat on the system. They started to issue more receipts than they had gold to back those receipts and no one would be any the wiser. They would loan out these receipts (which were not backed by the gold they had in their depositories) and collect interest on them.

This was the birth of the system we know today as Fractional Reserve Banking, and like this system of today this meant the goldsmiths were able to make astronomical amounts of money by loaning out what were essentially receipts. Critics of the paper money system call these receipts "fradulent receipts" because they were receipts for gold the goldsmiths didn't possess.

As the goldsmiths gradually got more confident with the system they had created, they would loan out up to 10 times the amount of paper receipts vs the gold they had in their deposits.

To simplify how they made money on this let's give an example in which a goldsmith charges the same rate of interest to creditors and debtors. In this example a goldsmith would pay interest of 6% on gold you had deposited with them, and then charge 6% interest on the paper receipts (money) you borrowed from them.

As they would lend out ten times what you had deposited with them, they're paying you 6% interest while they are making 60% interest.

This is how they made money on your gold.

The goldsmiths also discovered that their control of this fraudulent money supply gave them control over the economy and the assets of the people. They exacted their control by rowing the economy between easy money and tight money.

The way they did this was to make money easy to borrow and therefore increase the amount of money in circulation. Then they would suddenly tighten the money supply, taking it out of circulation by making loans more difficult to get or stopping offering loans altogether.

Why did they do this?

Because the result would be a certain percentage of the people being unable to repay their previous loans. By not having the facility to take out loans they would go bankrupt and be forced to sell their assets to the goldsmiths for literally pennies on the dollar.

This is the early version of what some claim is exactly what happens in the world economy of today. Today we use words like, "the business cycle," "boom and bust," "recession," and "depression." Critics contend it is nothing more than an extension of the money changer game of pulling money from the money supply, but on a much grander scale.

1100

King Henry I succeeds King William II to the throne of England. During his reign he decided to take the power the money changers had over the people, and he did this by creating a completely new form of money that took the form of a stick.

This stick was called, a "talley stick," and ended up being the longest lasting form of currency, lasting 726 years until 1826 (even though other currencies came and went in that same period and ran alongside the talley sticks).

The talley stick was a stick of polished wood into which notches were cut along one side, to indicate the denomination of money the stick represented. The stick was then split lengthwise through the notches, so that both pieces had a record of the notches. The King kept one half to protect against counterfeiting and the other half was spent into the economy and circulated as money.

It was also one of the most successful money systems in history, as the King demanded that all the King's taxes had to be paid in, "talley sticks," so this increased their circulation and acceptance as a legitimate form of money. This system would work well in keeping the power away from the money changers in England.

1225

St. Thomas Aquinas is born. And as the leading theologian of the Catholic Church, he argues that the charging of interest is wrong because it applies to "double charging," charging for both the money and the use of the money.

This concept followed the teachings of Aristotle that taught the purpose of money was to serve the members of society and to facilitate the exchange of goods needed to lead a virtuous life. Interest was contrary to reason and justice because it put an unnecessary burden on the use of money.

Thus, Church law in Middle Ages Europe forbade the charging of interest on loans and even made it a crime called, "usury."

1509

King Henry VIII succeeds King Henry VII to the throne in England. During his reign he relaxed the laws regarding usury, and and the money changers did not waste any time in re-asserting themselves over the population.

They quickly made their gold and silver coin system plentiful again. It is interesting to note that under King Henry VIII the Church of England separated from Roman Catholicism, whose Church law prevented the charging of interest on money.

England will become a prominent place for the money changers to codify their practice.

1553 

Queen Mary I succeeds Lady Jane Grey's nine day reign to the throne in England.

During her reign, Queen Mary I, a staunch Catholic, tightened the usury laws again. The money changers were not amused and in revenge they tightened the money supply by hoarding gold and silver coins and causing the economy to plummet.

1558

Queen Elizabeth I succeeds Queen Mary I, her half sister, to the throne in England.

During her reign, Queen Elizabeth I decided that in order to wrest control of the money supply she would have to issue her own gold and silver coins. She did this through the public treasury and successfully took control of the money supply from the money changers.

1609

The money changers in the Netherlands establish the the first central bank in history, in Amsterdam.

1642

Oliver Cromwell is financed by the money changers for the purposes of formenting a revolution in England, and allowing them to take control of the money system again.

After much bloodshed, Cromwell finally purges the parliament, overthrows King Charles I and puts him to death in 1649.

The money changers immediately consolidate their power and for the next few decades plunge Great Britain into a costly series of wars. They also take over a square mile of property in the center of London which becomes known as the City of London.

1688

The money changers in England following a series of squabbles with the Stuart Kings, Charles II (1660 - 1685) and James II (1685 - 1688), conspire with their far more successful money changing counterparts in the Netherlands, who had already set up a central bank there.

They decide to finance an invasion by William of Orange of Netherlands who they sound out and establish will be more favorable to them. The invasion is successful and William of Orange ascends to the throne in England as King William III in 1689.

1694 

Following a costly series of wars over the last 50 years, English Government officials go, cap in hand, to the money changers for loans necessary to pursue their political purposes. The money changers agree to solve this problem in exchange for a government sanctioned privately owned bank which could issue money created out of nothing.

This was deceptively named the "Bank of England." Critics content this was done for the sole purpose of duping the general public into believing it was part of the government, which it was not.

Like any other private corporation the Bank of England sold shares to get started.

The private investors, whose names were never revealed, were supposed to put up £1,250,000 in gold coins to buy their shares in the bank, but only £750,000 was ever received. Despite that the bank was duly chartered and began loaning out several times the money it supposedly had in reserves, all at interest... a theme that lies at the heart of every private Central Bank throughout history.

Although the Bank of England's private investors were never revealed, one of the Directors, William Paterson, stated:

• "The Bank hath benefit of interest on all monies which it creates out of nothing.”

Furthermore the Bank of England would loan government officials as much of the new currency as they wanted, as long as they secured the debt by direct taxation of the British people.

The Bank of England amounted to nothing less than the legal counterfeiting of a national currency for private gain, and thus any country that would fall under the control of a private bank would amount to nothing more than a plutocracy.

Soon after the Bank of England was formed it attacked the talley stick system, as it was money outside of the power of the money changers, just as King Henry I had intended it to be.

1698 

Following four years of the Bank of England, their plan to control the money supply had come on in leaps and bounds. They had flooded the country with so much money that the Government debt to the Bank had grown from the initial £1,250,000, to £16,000,000, in only four years.

That's an increase of 1,280%.

Critics content this increase in the money supply is the first step in a crucial process.

If the money in circulation in a country is £5,000,000, and a central bank is set up and prints another £15,000,000, then by sending this money out into the economy through loans etc, reduces the value of the initial £5,000,000 in circulation before the bank was formed.

This is because the initial £5,000,000 is now only 25% of the economy.

It also gives the bank control of 75% of the money in circulation with the £15,000,000 they sent out into the economy.

This inflation which is the reduction in worth of money borne by the common person, due to the economy being flooded with too much money, an economy which the Central Bank are responsible for.

Critics content Stage 2 of the Central Bank plan occurs as this inflation takes hold. The common person's money is worth less so he has to go to the bank to get a loan to help run his business etc. When the Central Bank is satisfied there are enough people with debt out there, the bank tightens the supply of money by not offering loans. 

Stage 3 occurs as the Central Bank sits back and waits for the debtors to them to go bankrupt, allowing the bank to then seize from them real wealth, businesses and property etc, for pennies on the dollar.

Inflation never effects a central bank in fact they are the only group who can benefit from it, as if they are ever short of money they can simply print more.

1757 

Benjamin Franklin travels to England and spends the next 18 years of his life there until just before the start of the American Revolution.

1760

Mayer Amschel Bauer changes him name to Mayer Amschel Rothschild and sets up the, House Of Rothschild, and soon learns that if he loans out money to Governments and Royalty then this is far more profitable than loaning to individuals. This is because the loans made are bigger and backed by their nations' taxes. He trains his five sons in the art of money creation.

1764

Benjamin Franklin is asked by officials of the Bank of England to explain the prosperity of the colonies in America. He replies:

• "That is simple. In the Colonies we issue our own money. It is called Colonial Scrip. We issue it in proper proportion to the demands of trade and industry to make the products pass easily from the producers to the consumers. In this manner creating for ourselves our own paper money, we control its purchasing power, and we have no interest to pay no one."

As a result of Franklin's statement, the British Parliament hurriedly passed the Currency Act of 1764. This prohibited colonial officials from issuing their own money and ordered them to pay all future taxes in gold or silver coins.

Referring to move after this act was passed, Franklin would state the following in his autobiography:

• "In one year, the conditions were so reversed that the era of prosperity ended, and a depression set in, to such an extent that the streets of the colonies were filled with the unemployed... The colonies would gladly have borne the little tax on tea and other matters had it not been that England took away from the colonies their money which created unemployment and dissatisfaction."
  
  "The viability of the colonists to get power to issue their own money permanently out of the hands of King George III  and the international bankers was the prime reason for the revolutionary war."

Control of America's money system will change hands 8 times since 1764.

1775

April 19th sees the start of the revolutionary war in Lexington, Massachusetts.

By this time the colonies had been drained of silver and gold coins as a result of British taxation. As a result of this, the continental government had no choice but to print money to finance the war.

At the start of the revolution the American money supply stood at $12,000,000. By the end of the war it was nearly $500,000,000 and as a result the currency was virtually worthless.

An example of this is that a pair of shoes now sold for $5,000 dollars. This also shows the danger of printing too much money. The reason Colonial Scrip had worked was because just enough was used to facilitate trade.

1781 (The Central Bank comes to America) 

Towards the end of the American Revolution the Continental Congress were desperate for money, so they allowed Robert Morris, their Financial Superintendent, to open a privately owned central bank, in the hope this would sort out the money problem.

Morris was a wealthy man who had grown wealthier during the revolution by trading in war materials.

This first central bank in America was called the Bank of North America, which was set up with a four year charter, and was closely modeled after the Bank of England. It was allowed to practice the fraudulent system of fractional reserve banking, so it could create money it didn't have, then charge interest on it.

The bank's charter called for private investors to put up $400,000 of initial capital, which Morris found himself unable to raise. Nevertheless he unashamedly used his political influence to have gold deposited in the bank, which had been loaned to America by France. Morris then loaned the money he needed to buy this bank from this deposit of gold that belonged to the government, or rather the American people.

This Bank of North America, again deceptively named so the common people would believe it was under the control of the government, was given a monopoly over the national currency.

Next up will be Part 2 (1791 - 1865).

==================

Email: village_whisperer@live.ca
Click 'comments' below to contribute to this post.

Please read disclaimer at bottom of blog.

The Battle for the Message Begins

I suspect over the next few weeks we will see a theme appear in some of the media coverage of the Occupy Wall Street protests as they spread across North America.

And the theme will focus on the one like in this story, How silly are the End the Fed signs at Occupy Kansas City?

Adbusters, the Vancouver-based anti-consumerist magazine, called on people in July’s 97th issue to flood into Lower Manhattan on September 17 to “occupy Wall Street for a few months.”

Obstentially the movement is to protest against corporate greed. But 'End the Fed' is an important component of real solutions for 'Occupy Wall Street'.

And I would suggest that a titanic battle is now underway to try and extinquish the 'End the Fed' component.

Articles in support of the movement are starting to pop up as well, like this one: Ron Paul and Occupy Wall Street should jointly call for full public disclosure of all Fed bailout money.

US Republican Presidential candidate Ron Paul Supports the ‘Occupy Wall Street’ Movement and there are a great many who do not want the two messages linked.

Understanding the role of central banks is our current economic situation is crucial.

And driving a wedge between the protestors and this concept is going to be a major theme in the coming weeks.

As Ralph Nader said on CNN...“The Federal Reserve is now a government within a government. It is totally out of control. Congress doesn't control it. It's funded by the banks and we either have constitutional government or we don't."

The power elite DO NOT WANT the 'Occupy Wall Street' movement to get anywhere near embracing this message because it is within this message that real reform and real solutions lie.

==================

Email: village_whisperer@live.ca
Click 'comments' below to contribute to this post.

Please read disclaimer at bottom of blog.

Dexia bank; Europe Bear Stearns Moment?

Before the demise of Lehman Brothers plunged the global financial system into a temporary state of anarchy in the Fall of 2008, the collapse of Bear Stearns fired a warning shot across the bow of the world.

If past is prelude, are the troubles of Franco-Belgian bank Dexia about to lead to a repeat the Lehman moment of 2008?

Dexia plays a significant role in the $2.9 trillion global municipal debt market. The bank backstops debt on the state and local government level across the world and across America, including New York City issued bonds.

Noting that just 3 years ago the Federal Reserve was spending more money propping up Dexia than any other bank in the world, this interview notes that Dexia is now so laden with toxic loans and derivatives and has such a stunning lack of transparency that the “market has lost complete faith.”

If the meltdown of ’08 taught us anything it’s that faith is what banks can least afford to lose in a crisis. This is an explosive issue in Europe definately worth watching this weekend.

==================

Email: village_whisperer@live.ca
Click 'comments' below to contribute to this post.

Please read disclaimer at bottom of blog.

There will be no US-style housing correction in Canada, or so says Royal LePage

Just 'cause we wanna refer to this down the road, we bring to you today the latest from Phil Soper, president and chief executive of the real estate company Royal LePage.

• "Canada is not set for a U.S. housing crash. Canada’s housing market will cool off in coming months, but a U.S.-style housing crash won’t happen."

Gee Phil, how comforting to know the raison d'etre of your business isn't a concern.

This comes, naturally, as many real estate observers have appeared in mainstream media predicting Canada’s housing market is set for a major correction as record low interest rates have spurred buyers to take on more debt than they can afford,

But Soper doesn't want you to be concerned.

He says prices in some markets are over blown, but "the Canadian economy is structured differently from that of the U.S., making a collapse unlikely."

Ahh, yes... Phil tells us it's 'unlikely'.

It brings to mind David Lereah, the man who was the chief economist of the US National Association of Realtors when the US Housing Bubble started to implode.

For those of you who don't know him, Lereah gained eternal notoriety when he brashly told everyone that - despite overwhelming evidence to the contrary - the US housing market was going to keep on chugging forever.

And Lereah did more than issue rosy forecasts.

Not only did he regularly trumpet the infallibility of housing as an investment in interviews and on TV... the brash Lereah even wrote a book in 2005 titled, Are You Missing the Real Estate Boom?.

Lereah says he grew concerned about the direction of the market in 2006, but that didn't stop him from re-issuing the book under the new title, "Why the Real Estate Boom Will Not Bust."

Even in January 2007, when the crash was picking up steam, he boldly stated: "It appears we have established a bottom."

Lereah is infamous for his cheer leading efforts during the height of the bubble and then later when he was denying that the industry was going bust.

Four years after that fiasco, as concerns spread that the Canadian Bubble is unsustainable and on the crest of imploding, the head of one of Canada's largest Real Estate companies tells us a collapse is 'unlikely'. 

Wouldn't care to publish a book telling us that, would you Phil?

==================

Email: village_whisperer@live.ca
Click 'comments' below to contribute to this post.

Please read disclaimer at bottom of blog.

Thur Post #3: Quote of the Year - 2011?

"The world will soon wake up to the reality that everyone is broke and can collect nothing from the bankrupt, who are owed unlimited amounts by the insolvent, who are attempting to make late payments on a bank holiday in the wrong country, with an unacceptable currency, against defaulted collateral, of which nobody is sure who holds title."

- Anonymous

==================

Email: village_whisperer@live.ca
Click 'comments' below to contribute to this post.

Please read disclaimer at bottom of blog.

Thur Post #2: IMF advisor says we face a Worldwide Banking Meltdown

It appears that between 2-4 Trillion Euros will be required to stabilize the European Debt Crisis.

Dr. Robert Shapiro who advised Presidents Clinton and Obama and who currently advises the IMF predicts a cascading meltdown of the World's banking system starting with Sovereign debt in the Eurozone, affecting the UK then finally bringing down the global banking system.

Shapiro starts off directly by advising that if European leaders cannot address this in a credible way that "within 2-3 weeks we will have a meltdown in Sovereign Debt that will produce a meltdown across the European Banking System."

==================

Email: village_whisperer@live.ca
Click 'comments' below to contribute to this post.

Please read disclaimer at bottom of blog.

Thur Post #1: History Channel Examines Questions about Gold in Fort Knox

Is Fort Knox empty?

The U.S. supposedly holds the world's largest reserve of Gold. But there hasn't been an audit of the Gold in storage in decades.

Futures contracts on Gold account for more than 100 times the amount of physical gold on the planet.

Critics contend that the United States has probably leased and lent the Gold that is supposedly in Fort Knox into the market as a way of manipulating the Gold price, supporting the value of the U.S. Dollar and supporting the validity of all these futures contracts. They also content the Gold has been used Gold swaps with foreign governments and Central Banks.

There have also been suggestions that the United States may have also leased and lent the phyisical Gold they hold for other nations as part of those manipulations.

If these rumours are true and the U.S. ever had to scramble to buy Gold back to meet the demands of foreign gold redemptions, $5,000-an-ounce doesn't look so unrealistic anymore.

Republican Presidential candidate Ron Paul Paul isn't so sure the nation's supply of Gold is all accounted for and thinks it might not exist at all.

He has introduced legislation that would require an independent count of the 5,000-plus tons of gold bullion that's sacked away in the Kentucky vault, as well as smaller amounts held in government facilities in Denver, West Point, and New York City. Paul also wants a lab to test the bars, to prove it's as pure as the U.S. Treasury Dept. says.

Recently the History Channel started to examine the issue and you can watch one of the few mainstream media's examination of this issue.

==================

Email: village_whisperer@live.ca
Click 'comments' below to contribute to this post.

Please read disclaimer at bottom of blog.

Blame the HST

On Monday we posted that the big news for real estate watchers in the Village on the Edge of the Rainforest was that not one single detached new home had sold in the month of September on the west side of the City of Vancouver.

This is significant because the west side is an area that has been considered the hottest real estate market in all of Canada.

One of the rationals being offered to defend this 'temporary aberration' is the decision of BC voters to rescind the Harmonized Sales Tax (HST) in a referendum last month.

The HST was to replace the old PST (provincial sales tax) and the federal GST.  But the new tax would tax items not taxed under the PST/GST arrangement. Specifically it would tax newly constructed real estate that sold for over $500,000, which in Vancouver is just about everything.

The HST has been voted out, but it will be over a year before the Province switches back to the old PST/GST tax structure.  Are we to believe that construction and buying has all but stopped as buyers wait for the levy to disappear more than a year from now?

Above is a story by Global TV which is making that very claim.

• "Squamish developer Douglas Day says home buyers want to wait until the HST is completely scraped to avoid paying the extra tax... Right now home buyers pay HST on newly constructed homes until the Province unwinds the controverisal tax and goes back to the former PST/HST system. Developers say that's causing home buyers to sit on the wallets right now and wait."

Now the Global TV story focuses on lower end new homes which would be marketed to local incomes. But defenders are offering this rational for the west side of the City of Vancouver, where tear downs are going for $2 million and larger houses are going for twice that.

Over and over we have been told that the west side of Vancouver is an exception to the rule, an area that has been skewing Lower Mainland statistics because rich Asian money is buying up property there. Local incomes aren't supposed to be coming into play because, as a world class city, the west side is attracting a new reality - a buyer for whom money isn't an option.

So if this influx of foreign money is creating a new paradigm of values, what gives with September's stunning lack of sales?

Are we now to believe that someone laying down $4 million for a house will really be dissuade from buying over the next 18 months because they really care about a few hundred thousand more in tax?

Is foreign money really establishing a new paradigm in Vancouver, or (as Garth Turner has suggested) is the new paradigm of foreign money on the west side nothing more than realtor-created, media-infused, jingoistic marketing crap?

Rationalizations for last month's results abound. Curiously no one locally, except the blogosphere, is suggesting the bubble may be ready to pop.

Speaking of realtor-created, media-infused, jingoistic marketing crap, take a look at this realtor's site for an example of the hype which reinforces the notion that the Vancouver market is being driven by wealthy Chinese buying up real estate here.

Some of the content is re-printed below:

• Continually ranked and voted as the “Most Livable City in the World,” Vancouver, BC is still relatively inexpensive compared to other top global cities.
  
  Vancouver has seen a decade of real estate price appreciation and new developments. The price of multi-million dollar estates, state-of-the-art Downtown Luxury Penthouses, and Waterfront Dream Homes have risen dramatically in the past 10 years. Some people call it a real estate bubble; I like to call it sustainable demand for arguably the best city in the world.
  
  The Chinese influence on Vancouver real estate has been a huge factor in the substantial home values increases since the turn of the new millennium. However, in the past 6-8 months the number of Chinese home buyers coming from mainland China and Hong Kong has intensified and boosted some home prices by up to 50% in the past 2 years, with their focus being on Richmond, Vancouver’s West Side, and now West Vancouver.
  
  Vancouver West Side is a very prestigious part of Vancouver with excellent schools and safe neighborhoods. It has also been the hottest Real Estate in Vancouver over the past several years, driven by offshore Chinese buyers and investors. Since August 2009, Chinese Real Estate Companies have been arranging tours of Chinese Buyers coming to Vancouver for a few days that often resulted in them buying multiple properties with cash offers. The average detached home price in Vancouver’s West Side is $1,698,925, up 46% from the January 2009 figure of $1,165,007. There have been many cases of homes in communities such as Point Grey, Kitsilano, Dunbar, and Shaughnessy listing and selling within days for $300,000 or 25% over asking price in some multiple offer scenarios.
  
  Chinese buyer interest in the Vancouver real estate market will continue to be driven by Canada and British Columbia’s strong benefits. Investors know that Canada’s stable banking system makes a US type over-lending disaster improbable. British Columbia’s rich natural resources are creating wealth and securing long-term interest in BC. Our safe and desirable multi-cultural lifestyle, superb educational system from Elementary to University and the fresh mild climate make Vancouver one of the most sought after and highly demanded global cities worldwide.

Asian savious aside, the fact remains, there were zero (0) sales of new, detached homes on the west side of Vancouver in the month of September.

There is more happening here than just the HST.

Lower Mainland September Statistics

Fellow blogger fish has posted stats for September over on his blog Vancouver RE and then some.

Of note, in Greater Vancouver sales rank as the third lowest in the month of September over the last 10 years. Months of inventory sits at 7.2.

In the Fraser Valley this is the third month in a row based where lower sales have combined with a higher influx of new listings. Months of inventory sits at 8.7.

In Victoria months of inventory has climbed to 10.8.

And on the Sushine Coast, months of inventory is a stunning 17.5.

Of course prices have not begun to fall yet.  With rising inventory, how long before the Real Estate industry starts to beat the drums that this is a 'buyers market' and that you need to support the market by buying now.

But if prices are still well above what local incomes can support, what can entry level buyers do?

Hmmm... perhaps it's time for yet another example of realtor-created, media-infused, jingoistic marketing crap.

==================

Email: village_whisperer@live.ca
Click 'comments' below to contribute to this post.

Please read disclaimer at bottom of blog.

Tues Post #3: BC immigration turns negative because of high real estate prices

Global TV news story on how people are leaving BC because of high real estate prices.

And just how distorted is the market in Vancouver?

Perhaps the most stunning comparison is made with these two charts showing prices of homes in markets across Canada and household incomes in those same cities. (Click on images to enlarge)

==================

Email: village_whisperer@live.ca
Click 'comments' below to contribute to this post.

Please read disclaimer at bottom of blog.

Tues Post #2: Anonymous - The Bankers are the Problem (Updated)

A video posting on youtube by the Anonymous hacker group passed on without comment.

Updated: New link added as old link was changed and came up as 'video set to private'.

==================

Email: village_whisperer@live.ca
Click 'comments' below to contribute to this post.

Please read disclaimer at bottom of blog.

Tues Post#1: All that glitters... is shining brighter

You've heard the talk.

Gold, that barbarous relic, is in a bubble and is going to crash - hard.

And what good is it?  You can't eat it.  It doesn't pay interest.  Why own it?

Last year the CME Group Inc, the biggest operator of U.S. futures exchanges, announced that physical gold could be accepted from its clearing members as collateral.

And yesterday the CME Group Inc said it will more than double the amount of physical gold it could accept from its clearing members as collateral, increasing the amount of bullion its customers could post as collateral to $500 million from $200 million, effective Monday.

Analysts welcome the move because investors could now use physical gold instead of just cash to meet margin requirements of other market products.

So is gold as good as money?  The CME Group certainly thnks so.

The CME announcement made news the same day as the Qatari Royal family made it known they plan to spend up to $10 billion (£6.4 billion) buying stakes in gold producers through their sovereign wealth fund.

Funny how the media isn't jumping all over these two developments as massive mistakes.  Isn't the CME Group Inc. taking a huge risk accepting collateral valued at the top of the bubble?

Aren't the Qatari Royal family courting certain disaster buying into the gold market when it can only collapse from this point forward at the current near record prices?

These moves appear to solidify the belief that precious metals have a long run still in front of them.

==================

Email: village_whisperer@live.ca
Click 'comments' below to contribute to this post.

Please read disclaimer at bottom of blog.

Mon Post #2: This crisis is a long way from over

Faithful readers know that I am fond of saying that the 2008 Great Financial Crisis is not over.

We suffered a financial earthquake in September 2008, the depth and breadth of which many of us still do not understand nor appreciate.

The western world has been on a credit binge for the last 40+ years and we have put off dealing with the effects of this binge over and over again the past four decades. Rather than deal with difficult recessions, Government has constantly intervened with 'stimulus' to avoid the pain of dealing with inherent problems.

The result?

As noted by the Boston Consulting Group in a recent report, the developed world currently has $20 trillion in debt over and above the 'sustainable threshold'.

The definition of "stable threshold" is a debt to GDP of 180%.

This $20 trillion in debt encompasses household, corporate and government debt and you read that correctly... that's $20 trillion over and above a debt to GDP ratio of 180%! 

Since 2008 all attempts to eliminate the excess debt have failed. 

This includes that US Federal Reserve's relentless pursuit of inflating our way out this insurmountable debt load... which after adding $3 trillion to the US National Debt have been for nothing.  Inflation has not worked so far because of the pressure to deleverage and because of the low demand for new credit.

And looming on the horizon is the elephant in the room that no one wants to acknowledge.

While everyone today is focused on the European sovereign debt problem right now, the debt problems of the PIIGS (Portugal, Italy, Ireland, Greece, Spain) et al are nothing compared to what looms in America.

US states have spent nearly half a trillion dollars more than they have collected in taxes, and face a $1 tillion hole in their pension funds. California alone is a bigger problem than the 'PIIGS' (less Spain) combined. Then throw in Illinois which has spent twice as much money as it has collected and is about six months behind on creditor payments.

From 2002 to 2008, the individual states had piled up debts right alongside their citizens’: their level of indebtedness, as a group, had almost doubled, and state spending had grown by two-thirds. In that time they had also systematically underfunded their pension plans and other future liabilities by a total of nearly $1.5 trillion. In response, perhaps, the pension money that they had set aside was invested in ever riskier assets. In 1980 only 23% of state pension money had been invested in the stock market; by 2008 the number had risen to 60%. To top it off, these pension funds were pretty much all assuming they could earn 8% on the money they had to invest, at a time when the Federal Reserve was promising to keep interest rates at zero. Toss in underfunded health-care plans, a reduction in federal dollars available to the states, and the depression in tax revenues caused by a soft economy, and you are looking at multi-trillion-dollar holes that can be dealt with in only one of two ways: massive cutbacks in public services or a default—or both.

At the municipal level, the financial health of American cities is in even greater deplorable shape.

Meanwhile there is consumer debt.

American Households are still more indebted than their counterparts in Austria, Germany, Spain, France and even Greece. Tens of millions of citizens remain burdened with mortgages they can no longer afford, in addition to soaring credit card bills and sky high student loans.

Trillions of dollars in outstanding consumer debt is stifling demand for goods and services and that's why the demand for new credit is so low. And without the consumer demand, cash-rich U.S. companies are reluctant to hire and unemployment remains stubbornly high.

As of June 30, roughly 1.6 million homeowners in the U.S. were either delinquent on mortgages or in some stage of the foreclosure process, according to CoreLogic. And the real estate data and analytics company reports that 10.9 million, or 22.5%, of homeowners are underwater on their mortgage — meaning the value of their homes has fallen so much it is now below the value of their original loan. CoreLogic said the figure, which peaked at 11.3 million in the fourth quarter of 2009, has declined slightly not because home prices are appreciating but because a growing number of mortgages are entering foreclosure.

America's banks, meanwhile, still have more than US$700-billion in home equity loans and other so-called second lien debt outstanding on those U.S. homes, according to SNL Financial.

Debts owed by American consumers account for almost half of the nearly US$9-trillion in worldwide bonds backed by pools of mortgages, car loans, credit card debt and student loans, which were sold to hedge funds, insurers and pension funds and endowments.

And that doesn’t include the US$4.1-trillion in mortgage debt sold by government-sponsored finance firms Fannie Mae and Freddie Mac.

Kenneth Rogoff, professor of economics and public policy at Harvard University and former chief economist at the International Monetary Fund, has said the ongoing crisis should be called the “Second Great Contraction” because households remain highly leveraged. He says the high level of consumer debt is what distinguishes this from other recessionary periods.

Meanwhile American banks also have their own big debt burdens to deal with. Next year alone, banks and financial institutions must find a way to either pay off or refinance US$307.8-billion in maturing debt, compared to the US$182-billion that is coming due this year, according to Standard & Poor’s.

This maturing debt for banks comes at a time when they must start raising capital to deal with new international banking standards.

Beyond bank debt, hundreds of billions of dollars in junk bonds sold to finance leveraged buyouts also are maturing soon. S&P says “the biggest risk” comes in 2013 and 2014, when US$502-billion in speculative-grade debt comes due.

The problems you see in the news today about Bank of America and Morgan Stanley are only the tip of the iceberg.

The issue of this decade is Debt.

And the issue hasn't even begun to be dealt with yet.

==================

Email: village_whisperer@live.ca
Click 'comments' below to contribute to this post.

Please read disclaimer at bottom of blog.

Mon Post #1: Not a single new home sold!

After taking the weekend off, we return to posting this morning with the big news for real estate watchers on the Wet Coast of Canada: not one single new home sold last month on the west side of Vancouver.

The significance of this cannot be understated.

For the past couple of years Vancouver’s west side housing market (along with that of the Vancouver suburb of Richmond) have been  red hot.

Back in March of 2011, Real Estate Board of Greater Vancouver president Jake Moldowan said in an interview that “it’s a huge sellers’ market, the strongest in those areas I’ve ever seen. And there’s no question that it’s the offshore market that’s focused on these two areas.”

According to the March 2011 report by the REBGV, demand for detached homes remained strong across the region, with particularly high sales volumes and price increases in Richmond and Vancouver's west side. In fact Moldowan said that it’s single detached homes in Richmond and Vancouver’s west side that are the most sought after properties in the entire Lower Mainland marketplace.

September 2011 marks the first 'no new home sale' month on the west side of Vancouver since records started been complied in 1994. Even the minicrash of 2008 saw four sales of new homes on the west side.

According to data released by realtor Larry Yatkowsky, there has been a 5% drop in the average price from last month and a 10% drop in the single family house average since the bubble highs of May, 2011.

Are the September numbers an indication the last remaining real estate bubble in the Western world has started to turn?

Time will tell.

==================

Email: village_whisperer@live.ca
Click 'comments' below to contribute to this post.

Please read disclaimer at bottom of blog.