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Godfrey Bloom Mep On Basel Iii

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A refreshing article from a UK Euro MP:

http://traderightuk.wordpress.com/2011/05/11/guest-post-godfrey-bloom-mep-on-basel-iii-2/

Guest Post: Godfrey Bloom MEP on Basel III

from Traderight Limited by traderightukbloom.jpg?w=101&h=135We have pleasure in presenting this guest blog:

Godfrey Bloom, Member of the European Parliament representing Yorkshire, England, delivered the attached address regarding Basel III in London this past February at Infoline’s Technical and Regulatory Update.

Mr. Bloom explains how Basel III fails to address the core of the banking problem–fiat money.

basel-iii.jpg?w=377&h=269&h=269

“Basel? I’d rather be in Las Vegas!”

Basel III

It is my experience over the last 40 years in both financial services and politics that regulation has become a substitute for common sense. Regulation, it would seem, is doomed to permanent failure. I therefore take no more interest in its study that I would in alchemy or astrology. There are others more qualified than me to give their views on subsection six, paragraph eight of Basel III. Or indeed Basel I or II, or any subsequent Basels which might or might not appear in the future.

The problem with modern banking is that we are struggling with a flawed system, not of banking itself, but of a failed method of a fiduciary medium – money itself. Ever since the concept of money was invented – it would appear by the Chinese thousands of years ago, but everyone has their pet theory – people have been trying to cheat the system. To a British audience I always refer back to Henry VIII and his penchant for debasing the coinage to fund his military adventurism. When Elizabeth I took the throne she appointed Thomas Gresham as her Chancellor. We will all remember from our exam days Gresham’s Law “bad money drives out good”. He stopped the rot and reintroduced the concept of sound money.

The problem today is that of an unholy alliance between politicians and central banks. We all know in this room that fiat currency is intrinsically worthless – just pretty paper. It only has value if the populace can be persuaded it is acceptable in general exchange for goods or assets. Periodically this confidence collapses. The best historical example of this is the Weimar Republic. Germans bought loaves of bread with wheel barrow loads of marks. There was a complete breakdown in confidence. Six months ago, in my constituency, a very clever forger was producing fake twenty pound notes. Apparently they were very good. He was eventually caught and given a long prison sentence – longer than nowadays you would get for quite nasty violent crime in the UK. The authorities, of course, are frightened that mass forging of UK legal tender would destabilize the country and bring down the economy.

Indeed, in the last war Britain and Germany plotted this very act of sabotage against each other.

Yet this is exactly what has been happening for generations in Europe, the UK and North America. You as bankers – senior people too or you would not be here today – must understand that we politicians cannot help ourselves. The system has given us a machine that prints money. We are weak, feeble individuals with very limited intellects. We do not understand economics. We do understand though, very well, that to get elected we have to try and give everybody what they want. To do this we keep the money printing machine running at full thrust. We just hope that when it all goes wrong it will be on somebody else’s watch. As monetary and economic cycles tend to last longer than ministerial office, we get away with this smoke and mirrors approach. It is how Gordon Brown got offered Chairmanship of the World Economic Forum. We rely on the pitifully short memories of the electorate, the ignorance, laziness and stupidity of journalists and public sector broadcasting.

So politicians, central bankers and the almost 100% Keynesian academic economists play the same game – easier in Europe where the state picks up the tab for academic salaries. Now commercial banks are not immoral like we politicians but amoral as only institutions can be. If it is possible under so-called regulations to lend money that is not there, create money out of the ether, re-designate junk to AAA, find a mug to buy it and tax payers to underwrite it, that is what a commercial bank will do, creaming a bit off for staff and a bit for political parties to oil the wheels.

bank-shares.jpg?w=201&h=250&h=250

Bank shares leapt in relief at Basel III capital rules

It was, do not forget, political interference in due diligence banking with the Community Reinvestment Act in the USA which started the rot in the last round of fiscal mayhem. A noble political ideal; the increase of home ownership laid low by idiot politicians’ interference and culminating with the Lehman Brothers fiasco.

Have we learned anything? Well, no. In committee only a few months ago I accused the President of the ECB, M Trichet, if he were not doing exactly the same thing as Lehman three years on. Buying junk sovereign debt, against his own rule book, The Maastricht Treaty, with fake credit ratings to get Greek, Irish and Portuguese debt away, underwritten by the tax payer – the ultimate lender of last resort. I was treated to the usual charming Gallic shrug. Well, he will be gone in a few weeks, on an indexed linked pension and no doubt most of his money in gold or Swiss francs.

But there is surely an enormous moral hazard here. Ordinary working folk in the UK, Ireland, Iceland and others picking up the responsibility for mal-investment by the great and the good, and the already wealthy leading players of a game in which the only ‘little people’ can lose.

So do not be fooled by Basel III. Regulations are not what are needed. It is a return to hard money. We must turn our backs on the boom-bust cycle. But to do that we must understand what causes it. Printing money, borrowing money, taxation and that master confidence trick “fractional reserve banking” must go. An understanding that public spending does not put money into an economy but takes it out, that there is not a world banking crisis, there are only parts of the world where banking has gone wrong – politicians and central banks have done it to themselves.

So far it would seem we have learned nothing from the 2008 debacle. In perhaps 150 years our antecedents will look back and wonder, as we do now about the medical profession who thought the patient died because not enough leeches were applied, and the answer was “ever more”.

We can no more regulate our way out of trouble than can an aeronautical engineer build a concrete aeroplane by continually amending the design after every failure.

I look forward to meeting you all again with the advent of Basel IV in five or ten years time when it has all gone wrong again.

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He starts off by saying banks and regulation and then goes on to tell us that banks are institutionally criminal, which is patently obvious and don't need regulation.

What does he even mean by hard money? He's given examples of where gold coins are clipped and debased by the elites, so clearly gold fails. As for booms and busts, well gold standards have led, empirically, to almost permanent busts and deflation.

Who 'controls' a gold standard? Errrr govts and politicians.

He seems very confused all ways up.

It seems sensible to focus on his main theme - Politicians and banks are institutionally criminal and go from there.............If Gresham could fix them, so can anyone else.

We need to start with jailing the perps though.

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I read the parties 2010 manifestos a few months Back.

UKIP was the only one that actually dedicated a bit specifically to the banking system. Only mentioned upping reserve requirements and seperating investment and retail arms (ala Vince Cable), but its better than nothing i guess.

Tory manifesto was populist bullet points

Liebour manifesto was dozens of pages of waffle. Even calling it a manifesto seems absurd. But then i guess most liebour voters cant read anyway.

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He starts off by saying banks and regulation and then goes on to tell us that banks are institutionally criminal, which is patently obvious and don't need regulation.

What does he even mean by hard money? He's given examples of where gold coins are clipped and debased by the elites, so clearly gold fails. As for booms and busts, well gold standards have led, empirically, to almost permanent busts and deflation.

Who 'controls' a gold standard? Errrr govts and politicians.

He seems very confused all ways up.

It seems sensible to focus on his main theme - Politicians and banks are institutionally criminal and go from there.............If Gresham could fix them, so can anyone else.

He does seem a tad confused, but he does try to get to the root of the problem and he is pretty close I think. He seems to advocate an end of 'fractional reserve' banking.

We need to start with jailing the perps though.

That is nothing only thing that will bring back a level of integrity that cannot be imposed through regulation.

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I read the parties 2010 manifestos a few months Back.

UKIP was the only one that actually dedicated a bit specifically to the banking system. Only mentioned upping reserve requirements and seperating investment and retail arms (ala Vince Cable), but its better than nothing i guess.

Tory manifesto was populist bullet points

Liebour manifesto was dozens of pages of waffle. Even calling it a manifesto seems absurd. But then i guess most liebour voters cant read anyway.

I didn't realise he was UKIP. I know these guys are supposed to be extremist fascist nutters but they do seem to talk a lot of sense.

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Nah, theyre definetly extremist fascist nutters, BBC told me so.

:)

Phew. For a moment there, I had those evil non compliant thoughts in my head but I feel better now, thanks for putting me straight. There is no need to contact the authorities, those reeducation camps are full enough as it is and I wouldn't want to be a burden.

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  • 311 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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