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Posts tagged ‘Government debt’

“4 Step Social Credi Solution”.

Excerpt: “The Struggle for Money” by H. M. Murray 1957. The 4 Step Social Credit Solution to the World’s Financial Crisis:
1. Set up a National Credit Account. At present we have only a National Debt Account; the banks having usurped all our National Credit—to create our National Debt which “they” own.
2. Institute a National Dividend;
3. Finance New Production by drafts on the National Credit Account, not out of Savings; and
4. Allow a Just Price Discount on all personal purchases, out of income, for final use or consumption—to adjust book prices to actual incomes. (This counters inflation and guides and motivates society as a whole to increase or decrease production).
Reference: http://www.scribd.com/doc/171650693/Struggle-for-Money-by-H-M-Murray-Final-Edit


Excerpt: “The Struggle for Money” by H. M. Murray 1957.


The 4 Step Social Credit Solution to the World’s Financial Crisis:


1.             Set up a National Credit Account. At present we have only a National Debt Account; the banks having usurped all our National Credit—to create our National Debt!

 2.             Institute a National Dividend;

 3.             Finance New Production by drafts on the National Credit Account, not out of Savings; and

 4.             Allow a Just Price Discount on all personal purchases, out of income, for final use or consumption—     to adjust book prices to actual incomes.

                (This counters inflation and guides and motivates society      as a whole to increase or decrease, as           required, production).


 Reference:    http://www.scribd.com/doc/171650693/Struggle-for-Money-by-H-M-Murray-Final-Edit


Now all the stages are set for bloody battle of suburbs

A NATIONAL debt crisis, such as the one Ireland is now suffering, tends to follow a four-stage pattern. We see these stages playing out in every episode of national bankruptcy — whether in Latin America, Asia or Western Europe. In Ireland, we are moving towards the third phase.

There is no escaping this pattern because the mathematical corollary of a housing boom is a debt bust. It is only a matter of time.

Now those suggesting that the endgame will be debt repudiation are taking the flak. But it will happen.

Let’s briefly examine the four stages of national bankruptcy.

The first phase is rapid: highly leveraged banks go bust alarmingly quickly. This leads to massive state intervention to prevent a bank run, political upheaval and inklings of just how deep the mess might become.

The second stage is a period of unusual calm. The remedial action taken by the State calms things down, banks don’t collapse, there is no run on the banks and the economy settles in to the grinding reality that falling incomes and too much debt don’t mix.

During this period, vested interests, powerful “insiders” in society, move to protect themselves. Supposedly binding agreements are signed. Likewise, the banks do deals with debtors in the hope that they can postpone the day of reckoning.


full article at source: http://www.davidmcwilliams.ie/2012/10/04/now-all-the-stages-are-set-for-bloody-battle-of-suburbs?utm_source=Website+Subscribers&utm_campaign=100ad2f1af-03102012&utm_medium=email

Irish bank debt negotiations going nowhere

Enda Kenny

Enda Kenny (Photo credit: Wikipedia)

We have become used to broken promises in this financial crisis. Remember Enda Kenny in December 2010 after the Greens had pulled the plug on the previous administration and political parties were on an election footing. Remember “Mr Kenny said there is no question of defaulting on sovereign debt or on senior bank bonds that are covered by the Guarantee but he believes that the taxpayer can save between €12-17bn by negotiating a sharing of losses with the unguaranteed senior bondholders”. Of course that promise became more nuanced in the subsequent manifesto a month later but no-one ever disabused us of the notion that this government would pursue to success a significant write-down on the remaining senior bondholder debt. And in June this year, Enda emerged from the all-nighter of the EU summit to tell us that some people had just found out he was not someone to be tangled……………………

full article at source:http://namawinelake.wordpress.com/2012/09/10/irish-bank-debt-negotiations-going-nowhere/

Three reasons I don’t like the idea of the Eurobonds

Wipe our Debt

Wipe our Debt (Photo credit: Images_of_Money)

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Three reasons I don’t like the idea of the Eurobonds:
  1. Issuing Eurobonds to swap for existent Government debt is equivalent to attempting to treat debt overhang by relabeling the debt. While it might reduce the interest burden on the sovereigns suffering from more severe debt overhang, but that is a relatively shallow improvement, especially given that the heavier-indebted sovereigns are already being financed or about to be financed from a collective funding source of ESM.
  2. Issuing Eurobonds to create capacity for new borrowing is equivalent to fighting debt overhang with more debt. In addition to being seriously problematic in terms of logic, there is also a capacity constraint. Eurozone will sport 89.964% debt/GDP ratio this year and under current IMF projections this debt will remain above 90% (+/-1%) bound for 2012-2015. At these levels, debt exerts long term drag on future growth potential for the Euro area as a whole.

full article at source: http://trueeconomics.blogspot.com/

Greek default exposes lies told to the Irish People by their gutless politicians

Greece has shown us in Ireland that we should have defaulted a long time ago our gutless politicians conned us the citizens to take on private bank debts and to guarantee massive gambling debts thus ballooning our national debt. After witnessing the largest default in history last Friday by Greece the markets did not collapse as our clueless politicians told us would happen, the Greek ATM,s are still working  and Greece is better off to the tune of 100 billion .Now if we only had an Irish politician who had the Balls to confront the gangsters in Europe and tell them to get stuffed we might have a chance to get our country back on its feet and have a future for our children and the rest of our citizens.The time has come for our politicians to represent the interests of the people of Ireland and not the interests of financial gangsters in Europe!

This is Irelands opportunity to rid ourselves of this ODIOUS Debt.

Default now ……………..If Greece can do this so must we !


The French Government Creates A Bank Run?

By Reggie Middleton

You know, if it wasn’t so damn destructive, it would actually be funny how regulators appear to find it genetically impossible to learn from mistakes – whether it be theirs or somebody elses. In 2008, when the US foolhardedly decided to allow banks to misreport their long term toxic assets bought with excessive, short term leverage, said banks collapsed. It was not as if this was unforeseen. France is anxious to repeat that exercise with its banks and sovereign debt. In 2008, when the US foolhardedly decided to ban shorts on insolvent financial companies, I made a small fortune constructing synthetic short positions with options that skyrocketed in value because regulators dabbled in markets in which they really had no clue. ZeroHedge reminds us that the short ban in the US ended in a 48% drop in financial company share prices.

full article here at source:http://boombustblog.com/BoomBustBlog/The-French-Government-Creates-A-Bank-Run-Here-I-Prove-A-Run-On-A-French-Bank-Is-Justified-And-Likely.html

The PIIGS Nations’ Problems Are Structural Not Cyclical

Written by Reggie Middleton

As illustrated in Why The Taxpaying Populace Of Greece Better Get Some Grease, a visual representation of Greece’s gross government debt easily demonstrates that their problems are structural in nature, and not cyclical… What does this mean? Well, first of all, bailout loans only help in cyclical situations where the loan recipient is in a downtun in its ecconomic cycle, but expects upticks to allow it to earn its way out of both its current economc situation and the added debt service from the bailout loans. As you can see from the chart above, Greece’s expenditures have literally been a permanent fixture hanging considerably above its revenue, considerably above. For twenty years, Greece has been kicking the inevitable can down the road. Now, after a global credit implosion, with:

  1. asset values plunging
  2. and economic activity stagnating
  3. with the promise of even more stagnation down the pike in the form of intense austerity programs
  4. material push back from the labor forces, unions, and the few legit taxpayers there are
  5. and collapsed asset values that were perpetually overstated in and attempt to sell to fill the void left by the credit crisis
  6. an insolvent banking system stuffed to the gills with bonds trading at 50 cents on the dollar held at par at 40x leverage, NPAs bulging and mismarked,
  7. rates about to spike
  8. trading partners undergoing their own austerity programs reducing exports and tourism
  9. and most importantly tens, if not hundreds of billions of Euro in bailout funds with collateral strings attached…

Greece is somehow expected to earn its way out of this 20 year hole that was made lethal by the Pan-European Sovereign Debt Crisis. Does anyone really think this will happen, or is Greece getting set up to have its assets confiscated at firesale prices. Is the Greek culture up for highly discunted volume sale, Walmart style?

full article at source here: http://boombustblog.com/BoomBustBlog/The-PIIGS-Nations-Problems-Are-Structural-Not-Cyclical-Thus-Bailout-Loans-Simply-Pave-the-Way-For-Asset-Confiscation-Down-the-Road.html


What happens to Greece will happen to Ireland it’s just a
matter of time as Ireland is in a far worse situation as it does not have the
earnings capacity to pay the interest on existing commitments made by the
gutless government

Sunday Newspapers = Political Corrective Spin,

Sunday 19.06.2011

Looking at the Sunday newspapers (Sunday Indo and Sunday Business Post) I again ask myself why do I put myself through this same disappointment I feel after reading these papers every Sunday

It’s like a ritual I go through I leave the sports section at the shop as I am not bothered or interested in any sport .Then I race through to see if anything jumps out at me and as I arrive home I then zoom in for closer inspection on that article .But every Sunday is the same I end up swearing I will not buy these papers again as there is nothing worth reading and all we have is the pampered mouthpieces of the establishment churning out the party line.

Well this Sunday is no different as the news such as it is; even with the political corrective spin, from the well placed mouthpieces is still dismal.

I have cut out various pieces for your amusement .Still ringing in my ears I hear Edna promising not to raise taxes.Well I have lost count of how many promises his party in government have now discarded and I take his latest promises with a pinch of salt. I am also shocked to think he would think the people would believe his fairy tails.

The last slide show that the current deficit outlook is going to be 30 Billion and this is just for the end of this year. This amount equates to the total tax intake for this year, we are also expecting to have run up the national deficit to 178billion. The interest on this at 5% is enough for anybody to proclaim a default because if Kenny is going to raise taxes as he clearly must, then he will only succeed in strangling the economy still further.

I have gone through this so many times I am left wondering if the public just like hearing fairytales and like the ostriches they want to bury their heads in the sand and hope it will all goes away.

Our country is in pearl and locked in a fight for survival.  The greatest danger is our own incompetent politicians and their cronies who are prepared to sell us out to satisfy their own personal interests.

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Wake up Ireland

The Breakdown Draws Near

Economic Researcher & Futurist,
 Author at ChrisMartenson.com
“We’re less than a year from the next major financial disruption”


Things are certainly speeding up, and it is my conclusion that we are not more than a year away from the next major financial and economic disruption.

Alas, predictions are tricky, especially about the future (credit: Yogi Berra), but here’s why I am convinced that the next big break is drawing near.

In order for the financial system to operate, it needs continual debt expansion and servicing. Both are important. If either is missing, then catastrophe can strike at any time. And by ‘catastrophe’ I mean big institutions and countries transiting from a state of insolvency into outright bankruptcy.

In a recent article, I noted that the IMF had added up the financing needs of the advanced economies and come to the startling conclusion that the combination of maturing and newdebt issuances came to more than a quarter of their combined economies over the next year. A quarter!

I also noted that this was just the sovereign debt, and that state, personal, and corporate debt were additive to the overall amount of financing needed this next year. Adding another dab of color to the picture, the IMF has now added bank refinancing to the tableau, and it’s an unhealthy shade of red:

Banks face $3.6 trillion “wall” of maturing debt: IMF

(Reuters) – The world’s banks face a $3.6 trillion “wall of maturing debt” in the next two years and must compete with debt-laden governments to secure financing, the IMF warned on Wednesday.

Many European banks need bigger capital cushions to restore market confidence and assure they can borrow, and some weak players will need to be closed, the International Monetary Fund said in its Global Financial Stability Report.

The debt rollover requirements are most acute for Irish and German banks, with as much as half of their outstanding debt coming due over the next two years, the fund said.“These bank funding needs coincide with higher sovereign refinancing requirements, heightening competition for scarce funding resources,” the IMF said.

When both big banks and sovereign entities are simultaneously facing twin walls of maturing debt, it is reasonable to ask exactly who will be doing all the buying of that debt? Especially at the ridiculously low, and negative I might add, interest rates that the central banks have engineered in their quest to bail out the big banks.

Greek T-Bill Sale Fails to Allay Fear

Greece‘s Public Debt Management Agency paid a high price to sell €1.625 billion of 13-week Treasury bills at an auction Tuesday, amid persistent speculation that the country will have to restructure its debt.

The 4.1% yield paid by Greece, which means it now pays more for 13-week money than the 3.8% Germany currently pays on its 30-year bond, is likely to increase concern over the sustainability of Greece’s debt-servicing costs.

Greek debt came under heavy selling pressure Monday after it emerged that the country had proposed extending repayments on its debt, pushing yields to euro-era highs.

Greek two-year bonds now yield more than 19.3%, up from 15.44% at the end of March.

With Greek 2-year bonds now yielding over 19%, the situation is out of control and clearly a catastrophe. When sovereign debt carries a rate of interest higher than nominal GDP growth, all that can ever happen is for the debts to pile up faster and faster, clearly the very last thing that one would like to see if avoiding an outright default is the desired outcome. How does more debt at higher rates help Greece?

It doesn’t, and default (termed “restructuring” by the spinsters in charge of everything…it sounds so much nicer) is clearly in the cards. The main question to be resolved is who is going to eat the losses — the banks and other major holders of the failed debt, or the public? I think we all know the most likely answer to that one.

“Contagion” is the fear here. With Ireland and Portugal already well down the path towards their own defaults, it is Spain that represents a much larger risk because of the scale of the debt involved. Spain is now officially on the bailout watch list, because it has denied needing a bailout, which means it does.

Spain is now at the ‘grasping at straws’ phase as it pins its hopes on China riding to the rescue:

European officials are hoping that the bailout for Portugal will be the last one, and debt markets have broadly shown both Spain and Italy appear to be succeeding in keeping investors’ faith.

Madrid is hoping for support from China for its efforts to recapitalize a struggling banking sector and there were also brighter signs in data showing its banks borrowed less in March from the European Central Bank than at any point in the past three years.


If Spain is hoping for a rescue by China, it had better get their cash, and soon. As noted here five weeks ago in “Warning Signs From China,” a slump in sales of homes in Beijing in February was certain to be followed by a crash in prices. I just didn’t expect things to be thissevere only one month later:

Beijing March New House Prices Plunge 26.7% M/M

BEIJING (MNI) – Prices of new homes in China’s capital plunged 26.7% month-on-month in March, the Beijing News reported Tuesday, citing data from the city’s Housing and Urban-Rural Development Commission.

Average prices of newly-built houses in March fell 10.9% over the same month last year to CNY19,679 per square meter, marking the first year-on-year decline since September 2009.

Home purchases fell 50.9% y/y and 41.5% m/m, the newspaper said, citing an unidentified official from the Housing Commission as saying the falls point to the government’s crackdown on speculation in the real estate market.

March Home Transactions in 30 Major Cities Fall 40.5% Y-o-Y

Housing transactions in major Chinese cities monitored by the China Index Research Institute (CIRI) dropped 40.5% year-on-year on average in March, a month when home buying typically enters a seasonal boom period.

Transactions rose month-on-month in 70% of the cities monitored, including five cities where transactions were up by more than 100% on a month earlier, secutimes.com reported on Wednesday, citing statistics from the CIRI. [CM note: month-on-month not useful for transactions as volumes have pronounced seasonality]<

Beijing posted a decrease of 48% from a year earlier; cities including Haikou, Chengdu, Tianjin and Hangzhou saw drops in their transaction volumes month-on-month, according to the statistics.

Meanwhile, land sales fell 21% quarter-on-quarter to 4,372 plots in 120 cities in the first quarter of 2011; 1,473 plots were for residential projects, the statistics showed.

The average price of floor area per square meter in the 120 cities dropped to RMB 1,225, down 15% m-o-m, according to the statistics.

Real estate is easy to track because it always follows the same progression. Sales volumes slow down, and people attribute it to the ‘market taking a breather.’ Then sales slump, but people say “prices are still firm,” trying to console themselves with what good news they can find in the situation. Then sales really drop off, and prices begin to move down. That’s where China currently is. What happens next is also easy to ‘predict’ (not really a prediction because it always happens), and that is mortgage defaults and banking losses, which compound the misery cycle by drying up lending and dumping cheap(er) properties back on the market.

In that report back in March, I also wrote this:

If China enters a full-fledged housing crash, then it will have some very serious problems on its hands.A collapse in GDP would surely follow, and all the things that China currently imports by the cargo-shipload would certainly slump in concert.

This is another possible risk to the global growth story that deserves our close attention. How this will impact things in the West remains unclear, but we might predict that China would cut way back on its Treasury purchases if it suddenly needed those funds back home to soften the blow of an epic housing bust.

If a more normal ratio for a healthy housing market is in the vicinity of 3x to 4x income, then China’s national housing market is overpriced by some 60% and certain major markets are overpriced by 80%.

Which means that the entire banking sector in China is significantly exposed.


The reason we care if China experiences a housing bust is the turmoil that will result in the global commodity and financial markets as a result. Everything is tuned to a smooth continuation of present trends, and China experiencing a housing bust would be quite disruptive.

If Spain is hoping for a big cash infusion from China and/or Chinese banks, it had better get its hands on that money quick. China is barreling toward its own full-fledged real estate crisis, which will drain its domestic liquidity just as surely as it did for the Western system, and probably even more quickly, given the stunning drop-offs in volumes in prices.

However, I should note that the United States housing market hit its peak (according to the Case-Shiller index) in July of 2006, and it was a year and a month before the first cracks appeared in the financial system, so perhaps there’s some time yet for Spain to cling to its hopes.

The larger story here is how a real estate slump in China will impact global growth, which absolutely must continue if the debt charade is to continue.

Who Will Buy All the Bonds?

With Japan now focusing on rebuilding itself, and China seemingly now in the grips of a housing bust that could prove to be one for the record books, given the enormous price-to-income gap that was allowed to develop, it would seem that the financing needs of the West will not be met by the East.

One important way to track how this story is unfolding is via the Treasury International Capital (TIC) report that comes out every month. The most recent one came out on April 15th and was quite robust, with a very large $97.7 billion inflow reported for February (the report lags by a month and a half).

On the surface things look ‘okay,’ although not especially stellar, given a combined US fiscal and trade deficit that is roughly twice as high as the February inflow. But digging into the report a bit, we find some early warning signs that perhaps all is not quite right:

Net foreign purchases of long-term securities totaled a lower-than-trend $26.9 billion in February, reflecting $32.4 billion of foreign purchases offset by $5.5 billion of domestic purchases of foreign securities. Inflows slowed for both Treasuries and equities with government agency bonds and corporate bonds posting outflows.

When including short-term securities, the February data tell a different story with a very large $97.7 billion inflow. Country data show little change in Chinese holdings of U.S. Treasuries, at $1.15 trillion, and a slight gain for Japanese holdings at $890 billion. It will be interesting to watch for change in Japanese Treasury holdings as rebuilding takes hold.


Only $26.9 billion, or 28%, of that $97.7 billion, was in long-term securities, reflecting a trend first outlined for us in our recent podcast interview with Paul Tustain of BullionVault whereby fewer and fewer participants are willing to lend long. Everybody is piling into the short end of things, not trusting the future. The concern here is that when interest rates begin to rise, financing costs will immediately skyrocket, because too much of the debt is piled up on the short end.

Also in the TIC data cited above, we need to reiterate that it is for February, and the Japanese earthquake hit on March 11. The next TIC report will be somewhat more telling, but even then only partially, and so it is the report for April (due to be released on June 15) that we’re really going to examine closely. Our prediction is for a rather large dropoff due to Japan’s withdrawal of funds.

With the Fed potentially backing away from the quantitative easing (QE) programs in June, the US government will need someone to buy roughly $130 billion of new bonds each month for the next year. So the question is, “Who will buy them all?”

Right now, that is entirely unclear.

Budget Fiasco

Sadly, the budget ‘cuts’ proposed so far in Washington DC are too miniscule to assist in any credible way, and they practically represent a rounding error, given the numbers involved. The Obama administration has proposed $38 billion in spending reductions. (I hesitate to call them ‘cuts’ because in many cases they are merely lesser increases than previously proposed).

Congress OKs big budget cuts — bigger fights await

April 14, 2011

WASHINGTON – Congress sent President Barack Obama hard-fought legislationcutting a record $38 billion from federal spending on Thursday, bestowing bipartisan support on the first major compromise between the White House and newly empowered Republicans in Congress.

The Environmental Protection Agency, one of the Republicans’ favorite targets, took a $1.6 billion cut. Spending for community health centers was reduced by $600 million, and the Community Development Block Grant program favored by mayors by $950 million more.

The bipartisan drive to cut federal spending reached into every corner of the government’s sprawl of domestic programs. Money to renovate the Commerce Department building in Washington was cut by $8 million. The Appalachian Regional Commission, a New Deal-era program, was nicked for another $8 million and the National Park Service by $127 million more.

For the record, these ‘cuts’ work out to ~$3 billion less in spending each month, or less than the amount the Fed has been pouring into the Treasury market each business day for the past five months.

The fact that a major write-up on the budget finds it meaningful to tell us about specific $8 million cuts (that’s million with an “m“) tells us that we are not yet at the serious stage in these conversations. After all, $8 million is only 0.0005% of the 2011 deficit, and even the entire $38 billion is just 2.3% of the deficit and slightly under 1% of the total 2011 budget.

How much is $38 billion?

  • Less than 2 weeks of new debt accumulation (on average)
  • About 2 weeks of Fed thin-air money printing, a.k.a. QE II

In other words, it’s a drop in the ocean.

It is this lack of seriousness that is driving the dollar down and oil, gold, silver, and other commodities up. It is the reason we will be watching the TIC report for clues that foreign buyers and holders of dollars are getting nervous about storing their wealth with a country that is increasingly seen as unable or unwilling to live within its means. It explains why the IMF has been finger-wagging so much of late.

Somehow the US federal government managed to increase its expenditures by 30% from 2008 to 2011, but is now struggling to reduce the total amount by just 1%.

That, my friends, is an out-of-control process, and the 1% in ‘cuts’ is simply not a credible response to a very large problem.


There are two entirely, completely, utterly different narratives at play here. One of them is that the economy is recovering, policies are working, and the vaunted consumer is either back in the game or close to it. The other is that the world is saturated with debt, there’s no realistic or practical model of growth that could promise its repayment, and the level of austerity required to balance the books is so far beyond the political will of the Western powers that it borders on fantasy to ponder that outcome.

If we believe the first story, we play the game and continue to store all of our wealth in fiat money. If we believe the second, we take our money out of the system and place it into ‘hard’ assets like gold and silver because the most likely event is a massive financial-currency-debt crisis.

The IMF, the World Bank, the BIS, and numerous other institutions with access to $2 calculators have finally arrived at the conclusion that there’s still ‘too much debt’ and that it cannot all be paid back. And they are now alert to the idea that the predicament only has two outcomes: either the living standards of over-indebted countries will be allowed to fall, or the global fiat regime will suffer a catastrophic failure.

China is unlikely to ride to the rescue of the West, although it may have some time yet to help out a few of the smaller and mid-sized players, such as Spain.



Chris over at www.wealthbuilder.ie   brought this excellent article to our attention. It is I believe a very real scenario that could come to pass in the next 10 months. It doesn’t look good for the world economy and this is bad news for us in Ireland   

Thank you Chris

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