(MartinArmstrong) “Politicians everywhere are sitting on their hands because they believe that if they do nothing and maintain the status quo mixed with austerity to save the bankers somehow we will grow our way out of this one as before. The problem is they fail to distinguish between a private generated financial crisis and a Sovereign Debt Crisis where they are the problem.

The people are just not to be given a right to vote on any of this and if the system can grow out of it, in two years everyone will forget about it – that’s the plan. To clarify why I have been critical of the austerity in Greece and the property taxes, Schumpeter describes the Business Cycle as a force of Creative Destruction. These are periods of tremendous economic transition. It is one thing to impose property taxes and insist upon government reducing its work force that sound like solid conservative economic advice for Greece. However, that presumes there are private sector jobs waiting in the wings.  What is taking place in Greece is that there is no private sector alternatives at this time. Laying people off is one thing. To impose then property taxes that are due irrespective of income then subjects those same people to massive waves of foreclosures for failure to pay the tax. The US Great Depression was so bad NOT because of the stock market crash, but (1) the sovereign debt crisis that wiped out savings and reduced capital in the USA contributing to over 3000 bank failures, and (2) the Dust Bowl that eliminated agrarian jobs when agriculture accounted for 40% of the civil work force resulting in the ‘hobo’ lifestyle.  It was WWII that provided the  ‘transition’ reducing unemployment and transformed farmers into skilled labor. The Great Depression after the Panic of 1857 was followed 4 years later by the US Civil War, which was also the ‘transition’ at that time relieving unemployment.

Today, there is no plan. There is no transition, only austerity. The politicians are doing NOTHING whatsoever for any reforms they reject because it would change the way they have been doing business since WWII. Italy’s debt is bigger than Spain, Portugal, and Greece combined.  It is too big to be bailed out and there is no PLAN B to even address what happens if sitting on their hands blows up in everyone’s face? Stay away from ALL government debt! This is a wave of Creative Destruction. We are in a transition to a completely new world ahead.”

Full Story: Italian Head of State Pledges to Resign Schumpeter’s Creative Destruction? (MartinArmstrong)

(MartinArmstrong) “Government Is Living in a State of Denial.  They speak, see & hear nothing of a debt crisis. .. Italy is the third largest bond issuer and nobody in government has figured out that this a Sovereign Debt Crisis yet?  What Government FAILS to understand is they are the PROBLEM!

Because government is the PROBLEM, they live in a state of denial and cannot correct the situation for they cannot objectively look at themselves. Instead, they attack the people. Fannie Mae asks for $7.8bn as losses continue. Morgan Stanley has been accused over mortgage bond issues and MF Global goes bust exposing the truth that SEC & CFTC never audit the NY banks and are incapable of detecting that they may be trading with client’s money.

.. the whole theory upon which the banking system has been constructed is unsound. Banks take short-term and demand deposits and lend long-term. When a financial crisis unfolds, a run on banks emerges because people want their money. Since the bank’s obligations are short-term to demand but their assets are loans of medium to long-term, they don’t have the cash and fail.  For you see, banks were not supposed to lend out your money.  ..  Banks began as merely a place to store your assets. They were not intended to lend your money out to someone else. When they realized they could make profit doing so, the scam eventually became the standard operational procedure. Formulae were then devised to calculate at any one time how much ‘reserves’ did they have to retain for normal operations. That was worked out with experience settling on 6%. So if they retained 6% of deposits as cash, they could cover normal business withdrawals with no problem. The problem became during a crisis and everyone wanted their cash and the bank simply does not have that cash and you end up with a bank run. It is ironic that what began as a scam simply became institutionalized. This is WHY the entire financial system is dependent upon CONFIDENCE!

What is unraveling even more quickly is the fear that banks will be hit with panic runs because of their holdings in sovereign debt. After a 50% haircut in Greek bonds, now it has become trendy not only to sell Italian bonds but also to publicly announce they have done so to try to maintain CONFIDENCE of their depositors.  The very reason politicians have suppressed the right of the people to vote and have forced austerity upon the people, has been to maintain the confidence of their bankers. But in the end game, the bankers exist based upon the confidence of the people in their sound management of their deposits.

.. The people may be shut out of the polls denied democracy when it is needed most, but the FREE MARKETS will respond as capital votes in its own self-interest that does not match the political nonsense.

SEQUENCE OF AN ECONOMIC PANDEMIC

At first blush, how capital responds depends entirely upon the (1) monetary system and (2) the freedom of capital movement. In a closed economy, the first reaction is to buy ALL tangible assets. These tend to be everything from durable commodities (metals), art, coins, stamps, and gold (assuming it is not a gold standard of some sort). This is the category I refer to as  ‘moveable assets’. The second tier of assets tend to be real estate that I refer to as ‘fixed non-movable assets’ meaning their value is limited to the territorial jurisdiction of the nation. In a non-communist nation, stocks and corporate bonds will also attract capital as a safe place to park funds.  In an open-economy where capital is free to leave, then the first blush is to FLEE to a different land in which case the local assets, including stocks and corporate bonds, will initially crash. This is typically indicated most pronouncedly in the collapse of the local currency against world currencies or in this case rise in the dollar vs decline in euro. They eventually swing back ONLY after the crisis manifests in a new currency or a debased/devaluation of the local currency takes place. The capital-flows will the swing back in the opposite direction.

Under today’s circumstances, the first blush response will be for capital to flee Europe and run to the United States as a safe port parking in US government paper. This is likely to further the deflationary effects within the United States by ensuring interest rates remain low as they did during the Great Depression for the same reason. However, banks are living off of the largest spreads perhaps in modern history so while rates of interest on cash will decline further and move in real terms NEGATIVE after inflation, banks should NOT be expected to lend money more easily. They will maintain their huge profit margins. Therefore, the first blush of the  Sovereign Debt Crisis in an open society tends to be currency based rather than even movable assets.

During the inflationary boom into 1929, gold declined in purchasing power for assets were rising against gold. During the collapse, the value of money rose (gold) as assets declined. Under a gold standard, the value of gold in fact DECLINES with inflation and RISES with deflation.

So for now, we are in the first blush mode where capital will fee to the dollar rather than assets and that may confuse the hell out of a lot of people. Therefore, under the current conditions, gold need not rise on the first blush for the bulk of capital will flee to the dollar. On the second swing where capital flees all currency, then we will see the Private vs Public assets manifest meaning they will rise as expressed in terms of currency.”

Full Story: Government is Living in a State of Debt Denial (MartinArmstrong)

Click for Nov 11, 2011 Martin Armstrong Radio Interview (FSN)

(TheMarketTicker) “.. there’s really nothing more-serious than grabbing client funds internally, and it appears to have happened in the case of MF Global…  It’s black-letter wrong, and The ‘mainstream media’ outlets this morning are talking about this being a “risk management” issue. Nonsense. This is a trust issue and Corzine is a former Goldman guy and the former governor of New Jersey.”

“But this much we do know: This is not an issue of a firm that allegedly broke every rule in the book when it comes to the sanctity of customer funds. Rather it is a story of utterly failed regulation and oversight that continues four years after the collapse that initiated in 2007. It is the story of willful and intentional blindness by our government and the instrumentalities within it that are supposed to prevent this sort of crap from happening.”

“Let us remember that MF Global was just added to the primary dealer list in 2010! The bankruptcy does raise questions, however, about how the Fed picks the primary dealers — especially since MF Global was one of four firms added to the ranks after new, more stringent requirements were put in effect in 2010.”

“I have to ask: Was that a political addition and where in the hell were the examiners that are supposed to be paying attention to what these firms are doing? If this is the result of “more-stringent” requirements can someone tell me why I should believe that any of the other Primary Dealers are in fact solvent and why I should not believe that they’re all doing the same thing?”

“This is the continuing story, as I lay out in Leverage, of “two worlds” where one has the rule of law (you and I) enforced, where robbing a bank gets you a nice long prison sentence and some cops looking for bank robbers to stop them while in the other, inhabited by politically-connected and powerful men and women you can pretty much do anything you damn well please and nothing happens to you — in fact, you get rewarded with calls from The President of the United States and pick the pockets of the public with essential impunity.”

“There are no checks and balances and the banksters wield their briefcases like John Dillinger wielded his tommy gun.  There has been no reform since 2008.  Dodd-Frank was a joke, Glass-Steagall was not put back in place, and there was no prosecution of those who did wrong.

SEVENTEEN PAGES IN GLASS-STEAGALL – 17 PAGES – KEPT THE BANKING SYSTEM SAFE FOR FIFTY YEARS.

And now we have another collapse that appears to show that there is no regulation, there is no oversight and nobody in the government gives a damn when one of the primary dealers that the government charges with making an orderly market in Treasuries appears to have co-mingled more than half a billion in customer funds with their own trading book.”

Full Story: Can You Survive It Being Over? (TheMarketTicker)

Amazingly, the media has been parroting as to how MF Global proves that the Frank-Dodd bill actually worked!

(Mish) “In spite of that background, (or do I mean because of it), MF Global thought Corzine was a perfect fit. Indeed, those looking for reckless behavior, massive risk taking, and willingness to bet the farm on marriage, in politics, and in life, Corzine represented rare ‘impossible to pass up’ talent.”

Full Story: Regulators Investigate MF Global for Missing Customer Money; MF Global Goes Bankrupt Before Making 1st Interest Payment; Corzine’s Achievement Sheet (Mish)

(Bloomberg) “The Volcker rule, as written in the Dodd Frank Act, had ‘so many different exemptions and exceptions and loopholes that it almost became nearly impossible for the regulators to fashion a rule that can live up to its original intent,’ said Barofsky, a Bloomberg Television contributing editor.”

Full Story: MF Exposes Risk Volcker Wants to Curb (Bloomberg)

“This video is looped and then slowed down and it clearly identifies a police officer tossing the flash-bang directly at the disabled vet on the ground when the protesters attempt to come to his aid. It detonates literally right next to him. None of the protesters are committing any act of violence – they are assisting a man who has just been shot with a rubber round in the head.

THERE IS NO EXCUSE FOR THIS ACT. EACH ACT OF EACH PARTY STANDS ALONE – NO PROTESTER CHARGED THE FENCES OR OTHERWISE ASSAULTED AN OFFICER. THIS WAS A PREMEDITATED ASSAULT BY THE POLICE UPON A PRONE AND INJURED MAN AND THOSE ATTEMPTING TO ASSIST HIM.” – Dateline Oakland: FELONIOUS ASSAULT By Police? (TheMarketTicker)

Perhaps Sergeant Shamar Thomas, a decorated Marine who stood with the “Occupy Wall Street” protest, said it best when he directed the following discourse towards police officers: “It takes a coward to harm an unarmed civilian…This is not a war zone, these are unarmed people. It does not make you tough to hurt these people… If you want to go fight, go to Iraq and Afghanistan… Leave these people alone, they are U.S. citizens…Why are you doing this to our people? I’ve been to Iraq 14 months for my people and you come here to hurt them, they don’t have guns… It doesn’t make any sense… How do you sleep at night? There is no honor in this…you’re here to protect them, protect us.You’re all walking around in riot gear like this is a war, these people don’t have guns.” Semper Fi, Sir!

One can only hope there is a special place in hell for police officers, judges, prison guards, and prosecutors who have sworn an oath to protect and serve the people, yet choose to use their “special powers” not only for the simple motive of personal gain, but even worse… to inflict tyranny over those they swore to defend, as if they get thrills from pulling the wings off a helpless fly…

And as Benjamin Franklin has said, “They who can give up essential liberty to obtain a little temporary safety, deserve neither liberty nor safety.” Those who wish to trample over another group’s rights and succeed, better know that it’s just a matter of time before they’re next in line…

Historically, all empires eventually fall due to the corruption of the “Rule of Law“. All accumulated wealth can be attributed to the fair and balanced application of the Rule of Law. If people don’t know what to expect because laws are selectively applied or perverted by the government, there will be flight of capital. In America, the judicial branch is considered untouchable even by the senate. Our justices are unelected officials who are held to no standards. They are immune from prosecution, and hold their positions for life.

If you’ve ever fought a speeding ticket and you know you were in the right, you’ll know that “Rule of Law” is blatently disregarded. Martin Armstrong’s written about it for years from prison. Good luck figuring out what his crime was – so much for a trial by jury. And just a few years back, could you imagine the outrage and outcry we would have seen over an agent groping children at an airport? Look at the ruckus caused just by Don Imus saying “Nappy-headed Ho” (2007 seems like oh so long ago)… “Lock up those damn pedophiles, and throw away the key” would have been the mantra of the day. Today, it’s “business as usual”…

And now, there have been so many outright disgusting and disgraceful acts of unneccessary violence perpertrated by police during the “Occupy Wall Street” movement it’s mind boggling. I myself have been threatened and harrassed by police for standing in front of my own apartment building in NYC — the night before the Thanksgiving Parade no less. While I may have been left feeling helpless and disheartened, these “minor” incidences don’t hold a candle to the violent video footage captured during peaceful protests. The policemen know they’re being recorded, yet they couldn’t even care less anymore – they know they’ll be “protected”.

Ironically, it may very well be these most blatant injustices that will fuel this rising movement more than any other. People can only be pushed and taken advantage of so far, and those in power know this.* The less people feel they have to lose, the more likely they are to take to the streets. And no where else has it been so blatant that those in control now completely follow their own set of rules.

“I don’t care if you hail from the left or right, or what your particular view of the “Occupy Wall Street” movement is.  The fact of the matter is that we no longer have the foundational principle of this nation underlying our nation: The Rule of Law. ” – Well, We Know Who The Felons Are – They Wear Badges (TheMarketTicker)

“Restore the Rule of Law. We’re a Constitutional Republic, not a Democracy. In a Democracy the 51% enslaves everyone else. Are you black, hispanic, or some other minority? In a democracy you’re a slave. Recognize this or make a huge mistake supporting any such move. A Constitutional Republic is governed by the Rule of Law, which says that nobody gets to infringe your fundamental liberty interests, no matter who they are: Rich, poor, white, black or Martian. Everyone who breaks the law is punished and for like crime one gets a like sentence. If I rob you of $50,000 whether I do it with a gun or briefcase is immaterial. Whether I take it one penny at a time or all at once is immaterial too. In each case I must go to prison for doing it and what I stole must be returned to the maximum extent possible.” – The Bottom Line On All The Frauds (TheMarketTicker)

* “I think he knows what Rome is. Rome is the mob. Conjure magic for them and they’ll be distracted. Take away their freedom and still they’ll roar. The beating heart of Rome is not the marble of the senate, it’s the sand of the coliseum. He’ll bring them death – and they will love him for it.” – Gracchus (movie Gladiator)