Sir Josiah Stamp was appointed a director of the Bank of England in 1928 so he was not a radical or a so called “conspiracy theorist”. One of our favorite quotes concerning the banking system was made by Sir Josiah Stamp and we think what he said back in the 1920s is very relevant to what is taking place in front of our very eyes.

He said the following: “Banking was conceived in iniquity and was born in sin. The Bankers own the earth. Take it away from them, but leave them the power to create deposits, and with the flick of the pen they will create enough deposits to buy it back again. However, take it away from them, and all the great fortunes like mine will disappear and they ought to disappear, for this would be a happier and better world to live in. But, if you wish to remain the slaves of Bankers and pay the cost of your own slavery, let them continue to create deposits.”

For the last year we have been witness to the continuing implosion of the Western banking system. The problem, of course, has been that bankers lent money that they did not have to people that did not have the money to pay them back. Besides lending money they did not have they lent it many times over or in financial market speak they levered themselves to the hilt! Greed and bad money management has led to the bankers’ demise as house prices started turning south and the bankers’ loans started losing value.

One would think that in a supposedly free market capitalist system that we have in the Western world the banks would be allowed to fail and their depositors would have lost all their money. Unfortunately this isn’t happening and what Sir Josiah Stamp said way back in the 1920s is happening one more time now as the Federal Reserve and the Bank of England in conjunction with their respective Treasurys are creating hundreds of billions of dollars and pounds, on the back of the taxpayers, in order to shore up almost worthless securities and OTC derivatives that the banks hold. So the old process seems to be in motion again as the bankers’ assets have been taken away from them but with the flick of a pen, or by switching on a PC and typing a number one with many zeros behind it, the Fed and the Old Lady of Threadneedle Street are trying to buy back the whole world again!

It will be interesting to observe over the next few years if the American and the British taxpayer wake up and realise that they are being taken for a ride and demand real reforms that bring about a monetary system that is based on sound money and a banking system that is not controlled by a cartel of banks headed by a Central Bank.

Will we go for slavery or liberty?

An article in the Sunday Telegraph ( 27 July, 2008) reveals that HM Treasury is planning to bail out U.K. mortgage lenders to the tune of amost £50 billion! The article explains that the Treasury would swap or exchange Gilt Edged Treasury paper for mortgage debt! Basically Gilt Edged Treasury paper is a euphemism for ripping off the taxpayer through the indirect tax called inflation. What else would one expect from a socialist governmet?
The Sunday Telegraph Article

This is President Nixon’s announcement of the end of gold convertibility for the American dollar. It is interesting to note that all the great things Mr Nixon predicted would happen like a stronger dollar, low inflation and a rebalancing of the trade deficit didn’t! In fact with the abandonment of gold as a monetary anchor the dollar has gone from just over 4 Swiss francs to almost parity today against the franc. Inflation was rampant in the 1970’s also as Mr Nixon closed the “gold window” and has remained rampant ever since and as a result created multiple bubbles of which the latest is the housing bubble. As for the trade deficit it has only gotten worse! America nowadays exports roughly $700 billion less than it imports from abroad! One also only needed $35 back in 1971 to buy one troy ounce of gold! The Austrian School of Economics was right that if the dollar was allowed to float versus gold the value of the dollar would plummet against the yellow metal! Milton Friedman and other mainstream economist were completely incorrect as they pointed out that the value of gold would drop precipitously once the gold standard was abandoned.

An Escape Route in a Time of Disaster

Darryl Robert Schoon
Jul 22, 2008

Only those who have gone too far know where the limits should have been.

Money served throughout history as a medium of exchange and as a storehouse of value. But when gold and silver coins were replaced by paper currencies, money no longer was the same. Paper money, no longer having intrinsic value, now functions only as a medium of exchange, a function that degrades over time.

The value of paper money continually loses value because the constant printing of paper money constantly dilutes the value of previously printed money. The more paper money printed, the less paper money is worth; and today, money is being printed at a faster rate than at any time in history.

In fiat paper money systems, today’s paper money will be worth less than tomorrow’s and will be worth less the day after ad infinitum. This constant degradation of paper money is known as inflation. When the process rapidly speeds up, it is known as hyperinflation. Remember that word.
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By John Browne, senior market advisor – Euro Pacific Capital

This week, we were treated to strong statements by both Treasury Secretary Hank Paulson and Fed Chairman Ben Bernanke about the desirability of a “strong dollar”, and the intention of policy makers to pursue strategies that will enhance its value. To the relief of many, the dollar responded to the moral support and managed a mild rally. The move is inconsequential. The harsh realities have not changed in the slightest, and the dollar is set to continue its overall decline.

Although some investors respond to such jawboning, the more sophisticated international players, who in large part determine the foreign exchange market, do not. Why the bearish sentiment despite the bullish talk from Washington?

First, the political situation is that both Paulson and Bernanke were handed a poisoned chalice by their predecessors. By consuming more than we have produced for decades, Americans are now confronting the reality of diminished living standards. These inevitable declines have been masked by a series of massive liquidity injections by former Fed Chairman Greenspan. This was done to avoid the political cost of the natural corrective medicine of recession. It fueled both the dot.com and the real estate booms. The current liquidity injections are now fueling inflation in food and energy.

The problem for policy makers is that large portions of the electorate are starting to realize that a weak dollar is not simply a problem for those who vacation in Paris. People innately understand that a falling dollar is adding to the cost of living. So there are very strong political reasons for the Fed and the Treasury to talk tough on the dollar. In his Congressional testimony, Bernanke noted that the strength of the dollar is “a top priority”. Notably, he did not say that it was “the” top priority.

The political reality of the continued erosion of American wealth, and the reluctance of officials to allow the public to fully comprehend the extent of the problem, has tied their hands and feet. However, their mouths still have the ability to move freely.

While inflation inflicts greater economic damage over the long term, recession causes more “political” damage over the short term. In an election year, it may come as no surprise that the short term problems will attract the lion’s share of attention. However, the rest of the world is not nearly as concerned with these political points, and instead favors combating inflation over recession.

Doubtless, Bernanke and Paulson see the acute danger of raising rates to combat inflation and to defend the U.S. dollar. The present recession is based on a housing collapse of gigantic proportions and could all too easily be pushed into a depression by an interest rate hike. With this terrifying prospect in view, it is little wonder that Bernanke and Paulson are keener to avoid depression.

Therefore, like a tackler in American Football or in Rugby, it pays not to look at what an opponent ‘says’ with his eyes or arms or mouth, but at what he ‘does’, with his feet! By ignoring the head fakes, and concentrating solely on the fundamentals, it’s easy to see that the Fed is pursuing a policy of inflation and dollar debasement. So, expect continued soft to neutral action on interest rates, accompanied by further overall weakness in the U.S. dollar.

With such a stance likely to be in place well into 2009, international faith in the U.S. dollar may fall to such depths that the special “reserve” status it enjoys may be challenged by the Euro. This possibility would move a step closer to a probability once the European Union becomes a sovereign state after January 1, 2009.