Honest Money

Investors are worried that the financial system is going to collapse and that US of A banks do not have sufficient capital to bear the consequences of their previous mistakes.

To reassure investors that this is not the case, the US of A Treasury is now subjecting banks to “stress tests”. The results of this exercise – to determine whether the banks have enough money to stay afloat in a range of scenarios – are due to be announced by the end of the month, says an editorial this week in the Financial Times. (1) The bureaucrats of the US of A government want to avoid a disorderly situation in which the stronger banks advertise the results of their stress tests while weaker banks resist doing so. This could further stigmatise the weaker banks and lead to an additional loss of CONFIDENCE. (2)

This was the late European Central Bank president Dr. Willem F. Duisenberg in May 2002:
What is money? Economists know that money is defined by the functions it performs, as a means of exchange, a unit of account and a store of value. But, just as importantly, money is also defined by the community for whom it performs these functions. Because it is an economic instrument for each of its users, it is also a political and cultural bond between them. Consider this simple fact: we engage in an exchange of goods and services everyday by using money as the means of exchange; and we offer our labour in exchange for money, which, in itself, has no value.
We only do this because we believe that we will, in turn, be able to exchange that money for more goods or services. This fact tells us much about the CONFIDENCE that we place in money itself. And it tells us much more about the confidence that we place in each other. Hence, money is, in essence, a social contract.
The euro, probably more than any other currency, represents the mutual CONFIDENCE at the heart of our community. It is the first currency that has not only severed its link to gold, but also its link to the nation-state. (3)

Dr Nouriel Roubini has already drawn our attention to the fact that the actual macro data are already worse than the more adverse scenario for 2009 in the stress tests. So the stress tests fail the basic criterion of reality check even before they are concluded. (4)

We can have the utmost confidence that the stress tests are a further exercise in deceit by the bureaucrats of the US of A guv’mint.

Nobel Prize winner Joseph Stiglitz points out that some of that guv’mint’s advisers have close ties to Wall Street. Hence, that guv’mint’s plan to fix the US of A banking system have been designed to help Wall Street rather than create a viable financial system. And hence, we can have the utmost confidence that that guv’mint’s plan to fix the US of A banking system is destined to fail. (5) (6)

Ivo Cerckel
ivocerckel@siquijor.ws

NOTES

(1)
Capitol capital
Published: April 16 2009 19:32 | Last updated: April 16 2009 19:32
http://www.ft.com/cms/s/0/b3dffd90-2ab0-11de-8415-00144feabdc0.html

(2)
Jobless put new slant on stress tests
By Krishna Guha in Washington
Published: April 17 2009 22:00 | Last updated: April 17 2009 23:01
http://www.ft.com/cms/s/0/ca1f86da-2b77-11de-b806-00144feabdc0.html

(3)
International Charlemagne Prize of Aachen for 2002
Acceptance speech by Dr. Willem F. Duisenberg, President of the European Central Bank, Aachen, 9 May 2002
http://www.ecb.eu/press/key/date/2002/html/sp020509.en.html
http://bphouse.com/honest_money/2008/09/03/

(4)
Stress Testing the Stress Test Scenarios: Actual Macro Data Are Already Worse than the More Adverse Scenario for 2009 in the Stress Tests. So the Stress Tests Fail the Basic Criterion of Reality Check Even Before They Are Concluded
Nouriel Roubini’s Global EconoMonitor Apr 13, 2009
http://www.rgemonitor.com/roubini-monitor/256382/stress_testing_the_stress_test_scenarios_actual_macro_data_are_already_worse_than_the_more_adverse_scenario_for_2009_in_the_stress_tests_so_the_stress_tests_fail_the_basic_criterion_of_reality_check_even_before_they_are_concluded

(5)
Nobel Prize winner Joseph Stiglitz says Wall St ties threaten bank-rescue plan
Nobel Prize-winning economist Joseph Stiglitz has warned the US bank-rescue plan is likely to fail as its architects are either in the “pocket of the banks or incompetent”.
By Telegraph Staff
Last Updated: 12:35PM BST 17 Apr 2009
http://www.telegraph.co.uk:80/finance/financetopics/financialcrisis/5169582/Nobel-Prize-winner-Joseph-Stiglitz-says-Wall-St-ties-threaten-bank-rescue-plan.html
Nobel Prize winner Joseph Stiglitz criticises bank-rescue plan
SNIP
Mr Stiglitz, who won the Nobel prize in 2001 said the Troubled Asset Relief Program, which will see the Government purchase assets and equity from financial institutions was not large enough to recapitalise the banking system and had been compromised because some of President Obama’s advisers had close ties to Wall Street.

(6)
Stiglitz Says White House Ties to Wall Street Doom Bank Rescue
By Michael McKee and Matthew Benjamin
http://www.bloomberg.com/apps/news?pid=20601087&sid=ahnPchOxZMh8&refer=home
SNIP
April 16 (Bloomberg) — The Obama administration’s plan to fix the U.S. banking system is destined to fail because the programs have been designed to help Wall Street rather than create a viable financial system, Nobel Prize-winning economist Joseph Stiglitz said.

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