BOOM as at 14th July 2019

STOP WORK ON LIBRA
US POLITICIANS DECLARE WAR ON LIBRA AND BITCOIN

The BOOM Editorial on 30th June was titled “THE FACEBOOK LIBRA GLOBAL CURRENCY — A CORPORATE DREAM?”.

BOOM explained that “This could be interpreted as a direct threat from a group of corporate entities to the US Dollar Empire which is already a digital currency (as are all national currencies). It could also be interpreted as a direct threat to all national currencies.”

Just 2 days later, on 2nd July, we saw the response from the US Congress. A letter was issued by the US House of Representatives Committee on Financial Services Chairwoman, Maxine Walters, to Facebook CEO, Mark Zuckerburg and the CEO of Calibra that stated.“We write to request that Facebook and its partners immediately agree to a  moratorium on any movement forward on Libra-its proposed cryptocurrency and Calibra-its proposed digital wallet. It appears that these products may lend themselves to an entirely new global financial system that is based out of Switzerland and intended to rival U.S. monetary policy and the dollar. This raises serious privacy, trading,  national security, and monetary policy concerns for not only Facebook’s over 2 billion users, but also for investors, consumers, and the broader global economy.”

The letter went on to say “If products and services like these are left improperly regulated and without sufficient oversight, they could pose systemic risks that endanger U.S. and global financial stability.”

“These risks are even more glaring in light of Facebook’s troubled past, where it did not always keep its users’ information safe.

The letter was counter-signed by the Chairmen and Chairwomen of the Subcommittee on Investor Protection, Entrepreneurship and Capital Markets; the Subcommittee on Housing, Community Development and Insurance; the Subcommittee on Oversight and Investigations and the Task Force on Financial Technology.

The Letter in Full:  

https://financialservices.house.gov/uploadedfiles/07.02.2019_-_fb_ltr.pdf

BOOM ended the Editorial on 30th June thus —  “BOOM suggests that Facebook return this project to the drawing board where it should remain. It appears clear to BOOM that Libra can never be a global currency because its design is faulty. This is the exact same reason why Bitcoin and other so-called “crypto-currencies” and “alt coins” can never be global currencies either. They cannot and should not be imposed upon the people without representation.”

Guess who subsequently took the exact same position?

DONALD SLAMS LIBRA AND BITCOIN

Last Thursday, Trump said “Facebook Libra’s ‘virtual currency’ will have little standing or dependability.”  He also said he was “not a fan of Bitcoin and other Cryptocurrencies, which are not money, and whose value is highly volatile and based on thin air.” He also said that “unregulated Crypto Assets can facilitate unlawful behavior, including drug trade and other illegal activity.”

Are Donald and the Congress reading BOOM?

RUSSIAN S400 MISSILES IN TURKEY

The Russian S400 Anti-Aircraft Missile System has arrived in Turkey. Think about that — the second largest armed force in NATO has purchased and received an advanced Russian Missile system. This is in direct defiance of the United States that has stated in no uncertain terms that this should not happen.

So what can the US administration do now? Answer: They can quietly move towards a policy of respectful cooperation and mutual discussion with their NATO ally. Or they can do something else. Now we can all watch to see what actually happens.

BOOM suggests that we watch the Turkish currency closely for any violent moves downward against the US Dollar. The Turkish stock market and the Turkish Bond market could perhaps encounter some harsh conditions as well.

JUNK BONDS WITH NEGATIVE YIELD

Last week, BOOM explained that $ 13 Trillion of Government issued bonds globally now have negative yields. That is shocking enough. But this week BOOM can report that there are now 14 Junk Bonds on issue that have negative yields. At the beginning of 2019, there were none.

GOLDMAN SACHS STABLECOIN

Rumors are spreading that Goldman Sachs is now working on its very own Stablecoin. JP Morgan has already developed an in-house-use-only Stablecoin. It’s called the JPM Coin, a private digital asset, a mimic for the US Dollar designed to register transactions on its private blockchain data base.

On 3rd March Editorial, BOOM said, in relation to the JPM Coin “It is highly likely that all banks and all large entities will eventually have similar (private) stablecoins and private blockchains” …..“Get the drift?  The Stablecoin revolution is coming”.

In economics, things work until they don’t. Until next week …………  Make your own conclusions, do your own research.  BOOM does not offer investment advice.

CLICK HERE FOR PODCASTS:   OUR BRAVE NEW ECONOMIC WORLD

Return to the BOOM Main Website –  BOOM Finance and Economics at  http://boomfinanceandeconomics.com/

EMAIL: gerry [@] boomfinanceandeconomics.com

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HOW MOST MONEY IS CREATED

BANKS CREATE FRESH NEW MONEY OUT OF THIN AIR
(but they always need a Borrower to do so)
THERE IS NO SUCH THING AS A DEPOSIT
BANKS PURCHASE SECURITIES, THEY DON’T MAKE LOANS
BANKS DON’T TAKE DEPOSITS, THEY BORROW YOUR MONEY

Watch this short 15 minutes video and learn as Professor Richard Werner brilliantly explains how the banking system and financial sector really work.

https://www.youtube.com/watch?v=EC0G7pY4wREhttp://

How is Most New Money Created ?

LOANS CREATE DEPOSITS — that is how almost all new money is created in the economy (by commercial banks making loans).

From the Bank of England Quarterly Bulletin Q1 2014    —

“Whenever a bank makes a loan, it simultaneously creates a matching deposit in the borrower’s bank account, thereby creating new money.

“Most money in the modern economy is in the form of bank deposits, which are created by commercial banks themselves”.

Youtube Video —  https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/money-in-the-modern-economy-an-introduction

and

https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/money-creation-in-the-modern-economy

Paper:  Money in the Modern Economy  PDF —  CLICK HERE

Quarterly Bulletins Index

http://www.bankofengland.co.uk/publications/Pages/quarterlybulletin/2014/qb14q1.aspx

Most economists are unaware of this and even ignore the banking & finance sectors in their econometric models.

On 25th April 2017, the central bank of Germany, the Bundesbank, released a statement on this matter —

“In terms of volume, the majority of the money supply is made up of book money, which is created through transactions between banks and domestic customers. Sight deposits are an example of book money: sight deposits are created when a bank settles transactions with a customer, ie it grants a credit, say, or purchases an asset and credits the corresponding amount to the customer’s bank account in return. This means that banks can create book money just by making an accounting entry: according to the Bundesbank’s economists, “this refutes a popular misconception that banks act simply as intermediaries at the time of lending – i.e. that banks can only grant credit using funds placed with them previously as deposits by other customers”. By the same token, excess central bank reserves are not a necessary precondition for a bank to grant credit (and thus create money).”

Reference: https://www.bundesbank.de/Redaktion/EN/Topics/2017/2017_04_25_how_money_is_created.html

The Reserve Bank of Australia (Australia’s central bank) has also contributed to the issue in a speech by Christopher Kent, the Assistant Governor on September 19th 2018.

“…… the vast bulk of broad money consists of bank deposits”

“Money can be created …….. when financial intermediaries make loans

“In the first instance, the process of money creation requires a willing borrower.”

“It’s also worth emphasizing that the process of money creation is not the result of the actions of any single bank – rather, the banking system as a whole acts to create money.”

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MOLS Denmark

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