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The banks and the state's pyramid scheme

Norges Bank, the Ministry of Finance and the private banks are playing an ingenious game to create money for loans. The problem is that the huge bill is sent in the future.


Pursuant to the Lottery Act, pyramid schemes and pyramid-generating turnover systems are prohibited from creating, operating, participating in or propagating, because all pyramid schemes ultimately end in disaster. It is thus illegal – just not when our politicians, central banks and private banks are doing it. They can retaliate to the unrecognizable while making a big profit on the use of our money. All this accumulation of debt must eventually be settled by future generations of taxpayers. When debt is out of control, as it is now in much of the industrialized world, an economic collapse always hits the middle class and the poor hardest.

Pyramid Game. Any pyramid game must grow in order to survive. The system can only continue if old fun is settled with new fun. More debt from the central government must always be issued via the Ministry of Finance to Norges Bank, and through your payroll account through the banking system and out into the market. Norges Bank is printing new money, but we are also using the oil fund to keep the pyramid scheme going. In 2016, enough is used to cover a historic budget deficit of 25 percent. Pyramid games grow until they collapse. Debt in the form of government bonds must be serviced and eventually repaid.
It is at this point that the tax collector enters the arena. Part of your salary is deducted automatically and helps pay interest and repayment of the government bond debt. Your paycheck and your tax payment keep the pyramid game going: Government bonds must be serviced. The mortgage loan with newly created credit from your salary must be serviced. The same applies to the car loan created with credit from the home loan, as well as the consumer loan created with credit from the car loan.
The built-in, accelerating function of the banks' pyramid scheme makes it virtually impossible to stop or reduce debt accumulation until it all collapses under its own weight.

Covert exchange. In March 2014, DnB chief Rune Bjerke stated that a splice team needed to make the banks more solid. Bjerke stated that "customers must live with a higher margin on loans – ie increased interest rates". Following a record result for DnB as a result of increased interest margins for the customers, Bjerke even takes out a multi-million bonus in addition to his million salary.
Let us explain: First, you "borrow" your money to DnB through fixed deposits to, for example, the salary account. Your deposit is virtually unsecured. Secondly, DnB takes most of the money in your payroll account and lends it to other customers over and over again – or spends it on their own structured financial products. This is done electronically on a PC. You and other DnB customers never see that the same money is lent many times for different purposes.
This is what is called "creating money out of thin air". The return on this utilization of your salary account is retained by DnB. DnB takes no risk and gets the profit – you take the risk and get almost zero. When top manager Rune Bjerke talks about raising interest rates so that you contribute to the splice team, he is in fact proposing that DnB should enrich itself even more on this repeated electronic use of your money.
DnB and other private banks are actually conducting a covert form of exploitation on the verge of fraud, with the blessing of the central bank and our politicians. This can be compared to a pyramid scheme – a kind of modern Casino. The pyramid scheme makes us all, and especially our children and grandchildren, permanent debt slaves.

A little history. This game showed itself earlier, when the financial crisis in 2008 triggered panic among banks and finance companies. The triggering factor was the collapse of the American investment bank Lehman Brothers. The most important thing to understand with the Lehman collapse is that the size of net debt is not decisive in triggering a worldwide financial crisis. Lehman had net debt of "only" 129 billion dollars – insignificant in the big picture. The panic was due to the fact that none of the other banks knew how vulnerable Lehman really was, nor – and more importantly – how vulnerable everyone else became as a result of the Lehman collapse. The banking market is large, and in the absence of such knowledge, a domino effect arose in which banks became afraid to trade with each other – and liquidity or access to credit dried up, with the risk of the banks collapsing.

The Norwegian Bank Guarantee Fund covers only 1,3 per cent of bank deposits.

While you have to provide your home and future salary as security for your bank loan, the bank in reality gives you insignificant security for the money they "borrow" from you.
A natural consequence of panic in the banking market is that depositors try to withdraw their money. With the banks' reserve or equity requirements of between five and ten per cent, however, only a few depositors can get the money out before the banks collapse. The Norwegian Bank Guarantee Fund is of little help – it covers only 1,3 per cent of bank deposits. The Bank Guarantee Fund guarantees coverage of up to NOK 26 million, but only has funds to cover approximately NOK 000 per deposit customer if you count on it. The government guarantee through the bank guarantee fund is NOK 28 billion (end of 2014), while the total deposit in Norway is as much as NOK 2060 billion. Few are aware of this today. Although the limit of two million as a guarantee on the citizens' accounts has been adopted in the form of a law, the fund will, when it is not sufficient, possibly have to obtain the coverage through increased taxes, which in turn affect the same deposit customers who are already taxpayers.

Without coverage. The pyramid scheme with the citizens' money takes place more or less the same in all countries. We can look at the US Federal Reserve (corresponding in this context Norges Bank) and the US Treasury (corresponding in this context the Ministry of Finance) as examples:
Politicians promise the people to spend money they do not have on welfare benefits.
Treasury issues government bonds (debt) that are bought by the largest banks.
The banks sell the bond (debt) to the Fed, but the Fed also has no money to pay with.
The Fed issues a coverless check and pays for the Treasury bond through the banks.
The banks earn commissions on the above trade.
This exercise is repeated every time the state needs money.

The ingenious system. In reality, the Norwegian Ministry of Finance and Norges Bank exchange debt securities with each other, which must be repaid by current and future taxpayers. The Ministry of Finance uses the "new" money for welfare benefits and to pay the state's salaries. When your employer transfers your salary to DnB, the pyramid scheme starts in earnest. The pyramid game has a name - Fractional Reserve Lending (FRL) – and is mentioned in the article «Uncontrollable debt» in Ny Tid 8 July 2015.
Let's give an example: You receive NOK 30 every month in your salary account. DnB electronically transfers NOK 000 to its account with Norges Bank as collateral, in order to be able to spend NOK 3000 of your payroll account on other loan customers. Secondly, DnB creates money out of nothing by transferring NOK 27 electronically to its account with Norges Bank. Whisk, then they have used your original deposit to create an additional 000 kroner which they can lend to the next loan customer. The process continues until DnB has used your original deposit 2700 or 27 times (depending on reserves / equity requirements which must be deposited in DnB's account with Norges Bank each time they carry out this electronic exercise). In practice, DnB uses your payroll account (which is a loan you give to DnB) as an instrument to create almost unlimited "liquidity money" that DnB can use on the bank's loan customers, or on the bank's own speculative investments in the financial market. You have all the risk that this will go well, while DnB will have all the profits as long as it goes well.

A mathematical impossibility. In previous articles, Ny Tid has discussed the uncontrollable debt situation the entire industrialized world is in. The world's total debt has grown by almost 40 per cent since the financial crisis in 2008, as a result of the banks' exponential credit growth. In most countries, it is mathematically impossible to service or repay the debt. The world's total derivatives market has grown from about NOK 7000 trillion to approximately NOK 17 trillion, which corresponds to more than 400 times the world's total GDP. Does the world need this derivatives market for the real economy to work? Of course not. However, it does not seem to affect DnB boss Rune Bjerke. DnB will also be part of the fun. Therefore, Bjerke asks for "volunteer work" to increase equity and thus the opportunity to gamble away even more of other people's money. Therefore, DnB has a gross derivative portfolio of a staggering NOK 20 trillion, which is as large as the oil fund. The portfolio is supposed to have an added value of NOK 7,4 billion (50 per cent of equity), but with such an exposure it becomes like a "think of a number" game. Does DnB need a gross derivative portfolio as large as Norway's oil wealth? Of course not. In addition, DnB has a proprietary trading portfolio in equities and bonds of NOK 30 billion. These are instruments to increase earnings and thus our own bonuses, and it is done with our money and for our risk. DnB regularly engages in gambling with customers' deposits, and is well paid for it.
Everywhere we see stock market and housing bubbles as a result of more and more credit created with the money of the middle class and the poor through the banks' pyramid schemes. As a result of this system, the US Federal Reserve (FED) has pressed approx. 32 trillion kroner since the financial crisis.
Now Mario Draghi, head of the European Central Bank (ECB), is doing the same kind of counterfeiting. They may seem desperate. Neither Fed chief Janet Yellen nor ECB chief Draghi will be at the helm when the pyramid scheme collapses.

Norway is more and more similar to the patient who is waiting for the settlement with his own depraved lifestyle.

Therefore, both citizens burden with even more newly printed debt to keep the pyramid scheme going. Cyprus and Greece have already crash-landed and are ruled by Brussels. One can expect crash landings in Spain, Italy, Portugal, France, and eventually also possibly Germany and Norway. No one escapes when the credit bubble bursts and the pyramid scheme collapses.

Welfare God. Modern social democracy is hopelessly insolvent. The western world is on the verge of bankruptcy, and Norway is becoming more and more like the patient waiting for the settlement with his own depraved lifestyle – all financed through a state- and bank-run pyramid scheme with the people's money and risk.
However, this financial self-deception and an impending collapse could have been avoided. Had the banks operated more or less freely, the individual bank's expansive lending would have immediately led to an accumulation of debt with competing banks, which in turn would have led to claims for repayment of debt from the other banks to one bank that has been too expansive. In this way, the banks themselves would ensure self-justice and stability in the credit and money markets.
The question especially today's young people must ask themselves is whether we should find ourselves in the situation where today's politicians, central banks and the private banking and financial market should continue to issue blank checks that future generations will never be able to pay for. When it has to go wrong anyway – why wait and see?

His Eirik Olav
Hans Eirik Olav
Olav has a long time from the financial world behind him.

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