BOOM as at 26th January 2020

LIVING STANDARDS DECLINE IN THE UNITED KINGDOM — CAPITALISM IS DEAD — WE WILL RUN OUT OF BILLIONAIRES — MORE BANK CRIME? — US BANKER BANNED FOR LIFE

 

LIVING STANDARDS DECLINE IN THE UNITED KINGDOM

A regular BOOM reader recently wrote a letter describing life in the United Kingdom (the UK). He is retired and lives in an idyllic town in the countryside of England. It is a powerful letter.

“Here in the UK it is very different.  My wife took a long time to understand the drooping heads as they battle the wind and rain, the coughing and spluttering as the winter colds take hold.  The 8/9 months of winter are depressing in the extreme and the National Health System (the NHS) is barely managing.  The funding for social care for the old and sick has been cut so much that it’s putting immense strain on the NHS as elderly have to stay in beds which should be clear for others. We have to wait many months for non-urgent treatment – my wife has been waiting 9 months for a cataract op.  You have to wait weeks to see a doctor GP and even then they only allow 10 mins and mostly offer drugs which carry a prescription charge of £10 each.  Most people use the A & E at the hospital and that puts added strain on them – it’s a vicious circle.  The NHS is excellent for emergencies though.

Funding for libraries has been cut so much that most are run by volunteers.  Our local services are a shadow of our former state when rubbish was collected weekly – now it’s fortnightly and done by contractors at vast expense.  Local taxes are heavy, £1,500 pa for small 2 up/2 down cottage which is about 7% of average (median) gross income at £22k pa.   Eating out is rare and a treat (although we can manage twice a week) most do unhealthy Big Mac takeaways or some such.  They spend many hours in front of ghastly TV programmes (while drinking cheap beer from the supermarkets) which are dumbed down for the lowest IQs – the programming is so bad that I have emailed the BBC to say I won’t be watching them anymore.  The pubs used to be social gathering places in the 60s I remember them well.  Now most can’t afford to go there.  A pint is £5 and a glass of wine £7 and the cops are round the corner waiting for when you come out, so you need a taxi at £2.50 a mile, if you can get one. Uber doesn’t operate in the rural areas.  But everyone does have the average smart phone and spend their time on FB, Twitter and Snapchat – wasting most of their sad lives exchanging photos of their favourite takeaway.  The bus services are non-existent – only in cities.  70% of cars are ten years old – I watch them regularly just to see (the registration plates give the year) – mine is 2009 and I won’t change it now for a few more years.  Diesel is £1.35 litre. Holidays are important and many go into debt to get to some sun for 1-2 weeks.  City breaks are popular to Europe and relatively cheap for a long weekend.  Many jobs are part-time and in the Gig economy – lots are working 2-3 jobs in the famous ‘service’ economy making enough so they ‘just-about-manage’.  The consumer debt load is heavy and growing just so they can buy rubbish from China they don’t need with money they don’t have.”

He explained later to BOOM in a conversation that the great recession in 2009 triggered by the global financial crisis had irrevocably changed the United Kingdom. Ever since then, the living standard of the average Briton had been in serious decline. However, he felt that this decline was just an acceleration from a longer term decline that began with Margaret Thatcher and Ronald Reagan during the 1980’s. Social welfare spending had been reduced dramatically then and that trend apparently continues to the present day.

He felt that the “class system” that was fixed in place by the Normans after their invasion in 1066 was also a strong contributor to the decline. The “establishment”, he said, is in full control politically and is a big part of the problem. He implied that they rule for their own benefit to the detriment of the vast majority of the UK’s citizens. He felt that the First Past the Post voting system, combined with a lack of compulsory voting has allowed the “establishment” right wing political parties to take a strangle hold on the nation.

If you do not understand these terms, the Class System and First Past The Post Voting, you can read about them here —

Social Class in the United Kingdom
https://en.wikipedia.org/wiki/Social_class_in_the_United_Kingdom

First Past the Post Voting
https://en.wikipedia.org/wiki/First-past-the-post_voting

SOCIAL UNREST AROUND THE WORLD

Social unrest and protests are continuing all over the Planet — in France (the Yellow Vests), the UK, Germany and the Netherlands (the Farmers with their Tractors), Australia, Hong Kong, Iraq, Lebanon, Chile, Ecuador, Spain (Catalonia), Bolivia, Serbia, Ukraine, Albania, Egypt, Nigeria and Ethiopa. One recent report claimed that 47 nations are currently experiencing significant social unrest. Rising living costs, government corruption, lack of political freedom and inequality of wealth seem to be the four major causes.

Is this surprising when the world’s 26 richest individuals now own as much wealth as the poorest 3.8 Billion people on the planet? And the billionaires apparently increased their combined fortunes by $2.5 Billion per day during 2018 (over $ 900 Billion for the year), while the world’s poorest 3.8 billion people watched as their “wealth” declined (relatively) by $500 Million every day for 365 days.

CAPITALISM IS DEAD
WE WILL RUN OUT OF BILLIONAIRES

One of the Billionaires, Marc Benioff, CEO of Salesforce, said at Davos last week “Capitalism as we have known it is dead”. Yes, Marc, it is clear that our capitalist system has devolved towards oligarchy. The “Elites”, the “Technocrats”, the “Establishment”, the “Deep State”, the Oligarchs, the Bankers, the “experts”, the “Gliteratti” now rule over almost all nations that were once prosperous and where political freedom and egalitarian democracy was the norm.

Everyone is now aware of the fact that the financial system that we inherited from Venice in the 16th century is clearly designed to funnel wealth slowly but surely to the group of already wealthy and privileged at the very top of the pyramid.

But many think that “increased taxes” will solve the situation. This is far from the truth. That strategy will just make everyone equally miserable. The US currently has a Budget Deficit in excess of $ 1 Trillion per year ($1000 Billion). To replace that expenditure with extra taxes would require the Government to confiscate (“tax”) the wealth of 1,000 Billionaires. The next year, they would have to do the same. And the year after that. It is obvious that they would eventually run out of Billionaires.

Taxing Billionaires much more may help marginally but it will not solve the world’s problems. The problem lies in the financial system where almost all of the fresh new money created comes from fresh new bank loan creation. Banks are at the very core of our problem. BOOM suggests you read through last week’s editorial yet again to see where the real solutions lie.  Here is the link —

BOOM DESIGNS THE PERFECT ECONOMY, ECONOMIC BLUEPRINT FOR THE FUTURE

https://boomfinanceandeconomics.wordpress.com/2020/01/18/boom-as-at-19th-january-2020/

MORE BANK CRIME?
US BANKER BANNED FOR LIFE

Wells Fargo bank’s former CEO, John Stumpf, was fined last week $17.5 million in a civil penalty by the United States Office of the Comptroller of the Currency. He was also banned from the banking industry for life. This was related to the creation of (reportedly) millions of fake bank accounts by staff during his period as CEO. Wells Fargo is the world’s 4th largest bank.

The Office of the Comptroller of the Currency also announced that it was pursuing five other former Wells Fargo executives for $37.5 million for their roles in the bank’s poor practices. Two other executives agreed to pay Million Dollar fines.

The Office of the Comptroller of the Currency said “Bank management intimidated and badgered employees to meet unattainable sales goals year after year, including by monitoring employees daily or hourly and reporting their sales performance to their managers, subjecting employees to hazing-like abuse, and threatening to terminate and actually terminating employees for failure to meet the goals.”

On February 2, 2018, the US Federal Reserve Bank barred Wells Fargo from growing its nearly US$2 trillion-asset base any further, based upon years of misconduct, until Wells Fargo fixed its internal problems to the satisfaction of the Federal Reserve.

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.


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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”.

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).”

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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