Balance sheet alchemy

The euro was launched in January 1999.

You can see below how the European Central Bank’s balance sheet changed since.

ECB Balance Sheet 2012 v 1999

This is no mere technicality for experts. It’s the core mechanism supporting the social arrangement around which today’s society revolves: money.

Over 14 years the European Central Bank put close to 1 trillion euros into the accounts of commercial banks. These accounts increased tenfold in the period, from 106 to 1,057 billions.

This was achieved first through cheap loans granted by the ECB to commercial banks. The banks were able to leverage these generous injections of primary cash and create many trillions of secondary money by extending loans to their own customers and by buying shares, bonds and other “products” from the financial markets.

Loans granted by commercial banks went for a large part into property markets, which caused enormous increases in house prices and also went massively to financial institutions, which used the money to take extra positions in financial markets, causing booms and busts in various areas of these markets.

A relatively modest portion of the new money trickled down into the “real” economy (apart from property) where ordinary folks buy cars and other mundane stuff on credit. Some went to companies, more often the larger ones. Among the latter, the now famous private equity groups, whose business is to buy companies mainly with borrowed money to achieve maximum return.

After the financial crisis of September 2008, the ECB, like other central banks, was forced to extend even more credit on even cheaper terms to commercial banks to save them from total illiquidity.

And more recently, from 2011, the ECB was forced to start buying sovereign bonds to prevent excessive rise in interest rates on debt from countries in trouble.

No doubt it will continue this sort of policy in the hope of saving the euro, supporting financial and property markets and preventing the economy from going into severe contraction.

This, of course, amounts to giving ever larger doses of the drug that triggered the patient’s illness.

To keep abreast of monetary developments visible on the ECB balance sheet, check regularly the section “weekly financial statements” on the ECB web site

index.en.html

Fear not, remember all this is very small beer in the universe.

Love,

Leo

Copyright © Leo Foresta 2012

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QE is their only card

Faced with a weak economy, central banks in the US, UK, Eurozone, Japan and other countries are engaging in further rounds of “Quantitative Easing” (QE).

This means they buy bonds in financial markets with new money that they just create for the purpose. The effect is to keep interest rates down and to inject cash in the economy.

The logic of the exercise was explained in detail by the US central bank (“the Fed”) when it embarked on such programmes in November 2010: http://www.newyorkfed.org/education/lsap/index.html

And the same logic is invoked again these days.

The Fed says it’s doing this to reduce unemployment by supporting demand for goods and services through more money flowing in the economy and cheaper credit for potential buyers.

Most experts doubt that this will work, pointing out that there is already a vast amount of money in circulation, and that what hampers demand is a general lack of confidence.

In fact new money created by central banks when buying bonds goes straight in the pockets of investors.

The latter use this money to acquire investible assets such as bonds, shares, derivative financial products, property and commodities, which pushes these markets up.

But very little new money actually trickles down into the “real economy”, i.e. purchases of (new) goods and services produced by the workforce.

In other words QE contributes to asset inflation while having hardly any effect on jobs.

The true reason for carrying out QE is not to protect jobs but to keep heavily indebted governments, banks and property owners afloat, thereby preventing massive defaults on debts which might bring down the global financial system.

While central banks in cahoots with governments are playing this big trick, companies keep squeezing their workforce. With the consequence that large sections of the middle classes (from whom comes most of the demand in the economy) are now poorer and feeling vulnerable.

No good news for demand; more weakness in the economy triggering yet more restructuring by companies.

The global economy looks on the brink of a downward spiral, but governments and central banks have no other card up their sleeves than QE.

As said over and over again on this blog, there are no technical “solutions” to the apparent global crisis as long as most people have their minds trapped in the materialist mode of thinking.

But a subtle change is happening beneath the surface, which a minority of intuitive individuals can already perceive.

Fear not, sharpen your intuitive capacity.

Love,

Leo

Copyright © Leo Foresta 2012

Winners and losers

Here is a very clear talk on “who is winning and who is losing” by independent Senator Bernie Sanders of Vermont.

While he focuses on the US, the essence of his talk also applies to the UK, to most of continental Europe, and to many other countries.

The shocking situation described here is only the logical consequence of the materialist world view, and its attendant fear, greed, competition and glorification of power.

Fear not, keep being informed.

Love,

Leo

Copyright © Leo Foresta 2012

Economic debate turns like loose screw

Nobel prize winner in economics Paul Krugman published an article entitled “Money for nothing” in yesterday’s New York Times.

It’s well written, sounds superificially convincing, but like other opinions on what to do with the economy is fraught with major contradictions.

Taking a few minutes to read it, find the fallacies and have a look through the comments is worth the effort:

http://www.nytimes.com/2012/07/27/opinion/money-for-nothing.html?ref=global-home

Many of the comments are almost poignant in their desperation.

Here is an example:

“Finally the lights came on for me. The reason that we need to worry about debt and get into austerity mode is because the “job creators” have no intention of creating jobs. Our economy has become an artificial world that only involves big player “investors.” They want an already broke populace to pay the bills of the investor class. Were the economy to actually get back to say, 60 years ago with nearly full employment, tax revenues would skyrocket solving the deficit problem. What the top tier wants is a slave class, perhaps in China, that will provide all the nuts and bolts so that they can continue their addictions to Gucci stuff and multi-thousand square foot homes so they can feel all that addictive power”. (comment posted on TNYT web site by Suzanne Wheat. It received a string of approvals).

Most comments illustrate that nobody is able to come up with anything resembling a coherent solution to the global economic challenge.

And we know why: because the problem is much broader than just economic, it is societal, environmental, demographic…The results of the materialist world view are coming home to roost.

Accelerating change on the planet is vibrational. Energies are reaching high noon at a spiritual level. Way above the head of any Nobel prize winner, particularly in a fake science like economics.

Fear not, calmly keep your eyes wide open.

Love,

Leo

Copyright © Leo Foresta 2012

Once in a century, or unprecedented ?

Commenting today on the latest UK economic figures showing a deepening recession, Business Secretary Vince Cable said that the crisis was a “once-in-a-century phenomenon”.

Dramatic as it sounds, this remark understates the situation.

The whole of mankind, and not only the UK, is moving towards its most important rendez-vous with history.  The crisis is wide and global: financial and economic, environmental, demographic, societal. No country, no group, will escape it.

A system of thought and a way of life are coming to a dead end. Materialists still deny it and desperately try to keep their confetti cloud in the air.

But credibility has almost completed fizzled out of their pathetic propaganda.

Fear not, prepare spiritually for unseen turbulence.

Love,

Leo

Copyright © Leo Foresta 2012

Debts, jobs, nature

As the materialist system is nearing meltdown, a crystal clear understanding of what is presently going on in the world is extremely useful to anyone intent on full spiritual transformation.

Let’s start with debts, currently public obsession number one. Not without reasons.

Debts are the flip side of money. Every penny in circulation is created ex nihilo by a bank or central bank through a book-keeping entry involving a debt for exactly the same amount.

While a debt is generally held by the same debtor for most of its duration, the corresponding money flows between many players in the economy.

If there isn’t enough traction in economic activity, a significant number of debtors fail to make sufficient revenues to be able to service and repay their debts. To avoid this, monetary authorities ease credit conditions, and therefore create more money to sustain activity.

As an ever greater amount of debts requires ever more activity for debtors to be able to service and repay their debts, and as easier credit is practically always used to stimulate activity, a perpetual spiral is created.

In fact, it amounts to a Ponzy scheme at global level. Like any such scheme (where participants are paid with money just brought in by new entrants) it has to end badly (when the flow of new entrants dries up).

At some point creditors become worried, confidence in the system erodes, people consume and invest less, growth in the economy is slowed or stopped, resulting in some of the debts becoming impossible to repay.

That is presently happening in the economy of developed countries (and soon enough in other countries).

Now jobs.

Because today’s economy produces largely standardised products and services on a very large scale, using vast amounts of energy and sophisticated technology, it only requires the labour of a limited fraction of the total population.

Out of the 7 billion people on earth, roughly 1 billion workers are enough to deliver about 95% of world GDP. And companies are constantly doing their utmost to squeeze payrolls because labour is by far the largest cost factor in the economy as a whole.

It is therefore evident that the trend can only be towards more unemployment and more badly paid employees.

Last but not least, nature.

Although money is a pure abstraction, economic activities involve land, plants, animals, minerals, oceans, eco-systems, processes, chemicals, wastes, high frequency electro-magnetic and radioactive emissions,… etc.

Activities in the mainstream economy cause major interferences with natural equilibriums.

The overused word environment conveys an idea of décor somehow external to us humans. This is totally misleading: we are part of nature, we are constantly in subtle interactions with every other creature on the planet and beyond.

The great ocean plastic vortex, the mass torturing of cows, pigs and chickens, the killing of soils in intensive farming …all these large scale horrors resulting from a total lack of respect for nature directly affect our minds, bodies, and souls.

There are not just about the environment; they concern a complete system to which we belong. Materialists have tried to cut off our subtle links with nature, but that is impossible.

With a bit of intellectual honesty, none of the above is particularly difficult to understand.

All it takes is to free oneself from mainstream materialist propaganda. Which is the first step towards spiritual transformation, the only effective way to respond to the global crisis.

For reference on the economy, here is a recent piece from the Financial Times: “A diabolical mix of US wages and European austerity”

http://www.ft.com/intl/cms/s/0/7b84f1c8-a977-11e1-9772-00144feabdc0.html#axzz1wRRjvVfG

Fear not, stay calm and attentive.

Love,

Leo

Copyright © Leo Foresta 2012

Greeks’ chance to create sane local economy

If humanity is to avoid slavery and self destruction, it will have to rearrange its activities in harmony with spirit and nature.

When they will be out of the euro and down the ladder of the world economy, Greeks will have a unique opportunity to free themselves from collective madness and create a local economy at 180 ° from global mainstream.

To do it, they will need to first step back and contemplate the vanity of choking one’s life with flashy cars, electronic gadgetry, fast food, fitted kitchens, plastics, prescription drugs, frequent travelling….etc., etc.

They will need to respect soils, animals, plants, water. And to respect themselves and each other. And to respect babies, children, women, old folks. And to respect time, and natural rhythms, and patience.

A sane local economy respectful of all is possible. Based on simplicity, harmony, and subtle rather than hard technologies.

Go for it, Greece. Show your genius. The world will watch in awe, and eventually follow you.

Fear not, embrace your higher self.

Love,

Leo

Copyright © Leo Foresta 2012

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