Deflation! Our whole global economy is now firmly in the grip of deflation. There is no way to engineer markets out of this natural demand to correct. Fasten your seat belts. It’s going to be a bumpy ride.
The banks have 2% to 20% collateral to back up their first tier loans. In the house of mirrors (the realm of shadow banking) there are hundreds more tiers, all backed up by worthless derivative speculations. Speculation on trajectory and speed are what we call horse racing investments. You can play these games on dogs, ponies, and even jumping frogs! When we introduce counterfeit issuance of arbitrary value, out come the thee shells, those who’ve seen this before, recognize the three card monty. The Central Banks thru the most prudent of local well run bank operations, are all stuck with currency speculation, as banks ultimately work with currency in some form. Speculation is gambling. Horse races. Fictitious value assignments. Saving is not speculation. Saving is storing away value, corn, wheat, rice, oil, gold, silver, real stuff…. for access later.
What does a “bank” mean to you? Is a bank a casino or a storage repository? When the values of their collateral against loans made deflates, the $1,000 in savings may only be backed by $200 in reserves. Who’s the fool? The saver who deposited the $1,000? Who’s the criminal? The banker who lost the client’s $800?
Low interest rates (a manipulated LIBOR) allow for the funding of the casino, funding speculation, gambling on future derived values, which are supposedly based on smoke and mirrors, trajectories, and counterfeit whatever. Savers finance the casino when central banks keep rates low. When interest rates are up, there is competition in the markets that delivers value to the savers, pensioners, and prudent investors. Meet Michael Hudson, a well trained, learned and experienced finance expert.
In this edition of the show Max interviews Michael Hudson from Michael-Hudson.com. He talks about the fictitious capital; what it is? And who is pushing it? Michael Hudson is President of The Institute for the Study of Long-Term Economic Trends (ISLET), a Wall Street Financial Analyst, Distinguished Research Professor of Economics at the University of Missouri, Kansas City and author of Super-Imperialism: The Economic Strategy of American Empire (1968 & 2003), Trade, Development and Foreign Debt (1992 & 2009) and of The Myth of Aid (1971).