QUESTION: Hi Martin,
Awhile back you mentioned the ECB doesn’t have unilateral authority to expand the money supply, and that the political crisis in Europe would begin once the ECB ran out of cash reserves. How far off are we from that moment, and how does the Repo crisis tie into that?

CG

ANSWER: Yes. To be clear, the Fed can create physical dollars to buy federal bonds to back the currency. The ECB simply has the power to create euros through its member banks, but there are no consolidated federal bonds to back the currency. This means that the ECB relies upon the consent of member states to be able to expand the money supply. That structural difference would be as if the Fed needed the approval of all 50 states to print dollars.

The very backing of banks is also substantially different. In the USA, reserves are held exclusively in US federal government instruments. In Europe, they have holdings of various member state debts. Since they have rejected the consolidation of debt, this also extends to the BAIL-IN policy. If banks are in trouble, the ECB could only lower rates. It cannot bail out banks in Italy for that would mean that money would flow from Germany to Italy. That is contrary to the no consolidation of the debt rule.

This is really one giant structural mess that I do not see being addressed until the system implodes. Only then, maybe, will the politicians revise the system or face the collapse of the entire EU structure.

The Italian government is considering tightening up existing quarantine restrictions as more than 53,000 people in the country have been charged by police in the past eight days with breaking the existing rules. In Spain, the fine is €300. It is very strange that you lock down the entire country when the vulnerable people are 65+. This really makes no sense for it will be impossible to rebuild the economy in any short order. Perhaps this is the prelude to the Monetary Crisis Cycle where we are witnessing the collapse of the financial system, and a revision I have been calling Bretton Woods II

The worldwide plot of the left to effectively overthrow Democracy is alive and well in Canada as well. The emergency bill introduced by Trudeau would grant cabinet sweeping powers to tax and spend without parliamentary approval through the end of 2021. In other words, Trudeau is using this manufactured crisis to eliminate democracy in Canada altogether.

Prime Minister Trudeau addressed Canadians on the Coronavirus manufactured panic on March 23, 2020.  Trudeau’s government is planning to grant itself wide-reaching new powers to tax and spend without parliamentary approval. Thirty-two MPs, divided proportionally based on party standing, will be in Ottawa to debate the bill being tabled on today. Like the Democrats in the United States, Trudeau is seeking powers that go well beyond any measure for a short-term crisis which is probably why they have fake research claiming this will last for 18 months when no such virus has done that. Once the powers are seized, the provisions will give a minority government the power to act unilaterally for 21 months. This is clearly a political coup taking place in Canada as well with the shrinking leftist side making a desperate attempt to overrule any democratic process.

The bill will allow Trudeau to impose anything with respect to taxation. Everywhere we look, the left is rising and seeking undemocratic powers in many places throughout the West.

QUESTION: Marty,
To those of us in the eurozone who own physical gold, what would you suggest to do?
Thanks for keeping your human heart.
Kind regards,
KVS

ANSWER: I believe you may start to see this idea floated in the press next week. It will probably be voluntary at first. I do not believe they will outlaw it on the first go. Longer-term, it just becomes very difficult. The Swiss began numbered accounts because Hitler outlawed having any account in a foreign country. The Swiss now ask the EU how high should the jump. They are no longer the safe haven they once were. So Swiss accounts will no longer be an option. The only option is the USA since it is not part of their reporting agreement.

Even New Zealand is part of the order where banks must report $10,000 in cash transactions. Australia was making it a criminal act to pay for anything in $10,000 in cash. The Common Reporting Standard (CRS) is an information standard for the automatic exchange of tax and financial information on a global level. It was put together by the Organisation for Economic Co-operation and Development (OECD) back in 2014. Its purpose was to hunt down tax evasion primarily for the European Union. They took the concept from the US Foreign Account Tax Compliance Act (FATCA), which imposed liabilities on foreign institutions if they did not report what Americans were doing outside the country.

The legal basis of the CRS is the Convention on Mutual Administrative Assistance in Tax Matters. As of 2016, 83 countries had signed an agreement to implement it. First reporting took place in September 2017. The CRS has many loopholes for countries have to sign the agreement. This has omitted the United States as well as most developing countries. Note that countries that are included are China, Singapore, Switzerland, most tax havens and of course Australian/New Zealand as well as Canada.

As of 2018, the signing nations to avoid are:

Albania, Andorra, Antigua and Barbuda, Aruba, Australia, Austria, The Bahamas, Bahrain, Belize, Brazil, Brunei Darussalam, Canada, Chile, China, Cook Islands, Costa Rica, Dominica, Ghana, Grenada, Hong Kong (China), Indonesia, Israel, Japan, Kuwait, Lebanon, Marshall Islands, Macao (China), Malaysia, Mauritius, Monaco, Nauru, New Zealand, Pakistan, Panama, Qatar, Russia, Saint Kitts and Nevis, Samoa, Saint Lucia, Saint Vincent and the Grenadines, Saudi Arabia, Singapore, Sint Maarten, Switzerland, Turkey, United Arab Emirates, Uruguay, Vanuatu