European Banks: We’re Out of Collateral

Jim Cramer’s declaration of ‘we’re saved’ aside, Houston, we have a problem.

From the UK Telegraph

Senior analysts and traders warned of impending bank failures as a summit intended to solve the European crisis failed to deliver a solution that eased concerns over bank funding.

The European Central Bank admitted it had held meetings about providing emergency funding to the region’s struggling banks, however City figures said a “collateral crunch” was looming.

“If anyone thinks things are getting better then they simply don’t understand how severe the problems are. I think a major bank could fail within weeks,” said one London-based executive at a major global bank.

Many banks, including some French, Italian and Spanish lenders, have already run out of many of the acceptable forms of collateral such as US Treasuries and other liquid securities used to finance short-term loans and have been forced to resort to lending out their gold reserves to maintain access to dollar funding.

So, what precisely does this mean?  It means that the banks one ability that they have used since 1659 to control people and governments, the ability to create money and control the quantity of it in our system, is nearly gone.  How is this, you ask?

While it is popular vernacular to refer to what has been practiced by Ben Bernanke’s Federal Reserve and Central Banks across the world as ‘printing money,’ that is a misnomer.  What they truly do, is issue DEBT.  Our worldwide monetary system is based upon nothing but the issuance of DEBT.  This means there has to be a BUYER of debt somewhere, some place, in order for money to either be printed (physically) or put into someone’s bank account electronically.


‘Printing’ or more accurately termed ‘raw printing’ is what happened in Weimar Germany and in Argentina.  This is when governments just run a printing press with NO promise to pay ANYTHING at any time, merely for the sake of fooling people into continuing with commerce as usual.  That doesn’t last very long, and we get the much feared monetary phenomenon of hyperinflation.

Make no mistake, bankers HATE hyperinflation above all else.  Why?  Because then the debts they hold are paid back by people in a currency worth nothing.  While ‘deflation’ is what bankers rail against in public, it is far preferrable to hyperinflation for a banker.  This is because at least in deflation, they (1) don’t get paid back in worthless dollars; and (2) they get to seize the underlying collateral which was pledged as a promise to pay in the future, and that collateral, while in the moment is undervalued, will only go UP in value in the future.  Not a bad deal….if you’re a banker.  So, make the public FEAR deflation, but be poised to loot the world when it happens.  Ah yes, bankers.  So clever.

So, what is occuring right now is that the original underlying collateral issued to create our existing money has been exhausted.  There are only so many tangible assets on our planet.  Pretty much everything not nailed down and much of what is nailed down has been pledged or encumbered by debt at some point in the past 400 years.  This means, that debt creation has exceeded the planet’s capacity to produce.  Assets cannot be created fast enough to keep up with the debt that has been created and must be serviced (interest must be paid on all debt, which interest is never created at the time of the original borrowing).

This means, that there’s no more collateral left for which anyone is willing to borrow to purchase.  This in turn, means the banks can no longer create money.  In fact, money is being destroyed at a rate exponential to that by which it was originally created.  The system is essentially running in reverse….on steroids.   All the recent mechanisms, bailouts and crazy schemes have all had ONE goal:  SELL MORE DEBT TO CREATE MORE MONEY.  The only way to sell debt is to find someone willing to buy.  The only way to find someone to buy is to have collateral to pledge.  There isn’t any more that anyone is willing to borrow to purchase.

This means the banks can no longer create money – unless of course, they’d like to order governments to print raw dollars (backed by nothing).  This the banks will not do, for the reasons I outlined above.  They have no desire to have the enormous debts they hold to be paid back with NOTHING.  They’d much rather be able to seize whatever collateral that exists in hard, tangible assets.

People had better think long and hard about this for this is TRULY how our monetary system operates.  It is in its most rudimentary definition, a Ponzi scheme.  One that makes all others look like mere rounding errors.  The entire system is based upon having to find another sucker to buy in to the debt peddling.  I don’t know about you, but I can’t take on any more debt, nor do I have the inclination to do so.

This is truly the end of the road folks.  Can it go on a little bit longer as they turn over couch cushions to find that last little place that might be able or willing to take on just a bit more debt?  Sure.  However, it won’t go on much longer because the bankers themselves have just told you the truth.  The one little grain of truth that means anything:  There is no more collateral.  They used it all.  Therefore, there can and will be no more debt-money creation.

Plan accordingly.  Oh, and you’d be wise to follow the bankers’ own actions:  the only things that are going to matter are hard, tangible assets which have value due to their practicable use (and one might take note that you can’t eat gold and it won’t put a roof over your head or protect you from violence).

If you’d like to read more about how our money = debt, you can visit Money As Debt and The Banking System, and of course, if you’d prefer to learn through video, visit FedUpUSA’s Educational Videos page.  If you’d like to stop this insanity, support Bill Still for president.  He’s the only one who will stop this.  Everyone else would like it to continue, because this system is what keeps those in power, very wealthy and exempt from the very laws that they write.