The History and Remedy of Financial Crises and Bank Failures
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The author Michael Schemmann Michael Sche is a professional banker, certified public accountant, and university professor of accounting and finance. The book reviews a long litany of financial crises and bank failures since the 3rd century right up to the ongoing Global Financial Crisis. The author analyzes the financial statement mmann of a large international commercial bank in Frankfurt, Germany, and concludes that IFRS accounting principles and standards are not followed but violated, rendering the statements rather false and misleading. The book contains a remedy to end the Global Financial Crisis and prevent future crises, calling on the European Central Bank to step in and take over the role of money Money creator which is currently done by the private commercial banks, and allow governments to buy-back their general Breakdown and government debt theld by the banks, thereby reducing the MON outstanding sovereign debt of the euro area by 32% while improving the banks' liquidity sevenfold in a way that is Breakthrough completely inflation-neutral (sterile). The misconceived EY austerity programs 'to save the euro' can then be rolled back and abandoned. Br iicpa eak do The History and Remedy IICPA Publications wn and Br 1st Edition - 31 October 2013 of Financial Crises and ISBN 978-1492920595 eak Bank Failures thr ough IICPA PUBLICATIONS Money. Breakdown and Breakthrough. The History and Modern states gave control of monetary policy and markets to the Remedy of Financial Crises and Bank Failures. (1st Edition.) barons of global finance. The experiment has resulted in the same By Michael Schemmann disastrous outcomes as before. The barons have debased the coinage and corrupted the markets. Copyright © by Michael Schemmann 2013, 2015 The state lost control of the currency as central banks allowed the barons in banks and shadow banks to "create" money from securitisation and quantitative easing. The state lost control of markets as the SEC, FSA and others allowed those same barons to set up alternative trading platforms This publication is designed to provide accurate and beyond any public scrutiny and to bastardise public exchanges with authoritative information in regard to the subject matter covered. algorithmic trading and synthetic instruments priced against It is sold/distributed with the understanding that the publisher is fraudulent reference rates. not engaged in rendering legal, accounting, investment, or other professional services. If legal advice or other professional assistance is required, the services of a competent professional London Banker person should be sought. Wednesday 20 March 2013. londonbanker.blogspot.com — From a Declaration of Principles jointly adopted by Committee of the American Bar Association and a Committee of Publishers and Associations. Text and images referenced to Wikipedia are reproduced under the GNU Free Documentation License at http://en.wikipedia.org/wiki/GNU_Free_ Documentation _License; and images under the Creative Commons Attribution-Share Alike 3.0 Unported License. 258 pages, illustrated. ISBN-13: 978-1492920595 ISBN-10: 1492920592 IICPA Publications Website: www.iicpa.com With notice request of copyright infringement 2015-07-14 CONTENTS INTRODUCTION INTRODUCTION 5 Christian clerics preach to lay up treasure in heaven: wenn die Münze im Kästlein klingt, die Seele in den Himmel springt — as MONEY AND DEBT — THE NUMBERS 10 the coin in the collection box sounds, the soul into heaven bounds (or jumps). Buddhists give alms for the benefit of their HISTORY OF ECONOMIC CRISES AND BANK FAILURES 23 karma creating seeds in the mind that will sprout into the appropriate result (PƗli vipaka) when met with the right THE GLOBAL FINANCIAL CRISIS 131 conditions. The followers of Mammon would rather put their LOSSES FROM THE GLOBAL FINANCIAL CRISIS: gains into the bank. Both practices are based on faith, and faith FROM 2007—ONGOING 145 alone. Heaven (in my native German “Himmel”) is also the blue sky on a sunny day. Money in the bank is merely bookkeeping THE U.K. BANK CHARTER ACT 1844 – REVISITED 148 in the abstract, and the U.S. dollar bills say so: “In God We Trust.” When I was a young banker in training, the treasurer PERVERSE ‘MONEY’ MACHINES 168 asked me whether the payment-clearing of the day balanced. “I believe it does,” I replied. “Believing commonly means not Irving Fisher: Bankers Often Oppose Their Own Interests 173 knowing anything,” he shouted. (Glauben heißt bekanntlich nichts wissen.) A REMEDY FOR THE PRESENT BANKING AND EURO SOVEREIGN DEBT CRISIS 186 My school year as a foreign exchange student in Pennsylvania APPENDIX 1 ended in June 1959. I received the obligatory high school Speech by Robert Peel on the Bank Charter Act 1844 202 diploma and a month later was back in Germany being told to repeat grade 12 in preparation of the challenging Abitur APPENDIX 2 examinations at the end of grade 13 including higher math, two John Law of Lauriston and the Mississippi Bubble 216 foreign languages, physics and chemistry at first year college level, none of which I had taken in America. After a frustrating INDEX 255 couple of months stuck in high school again with my younger peers, I decided to become a banker on the suggestion of a school friend who heard that I liked money of which I had little or nothing. My father was a vocational school teacher. The banking decision was an impulsive one like so many others that young people take. I was accepted as an apprentice at a large German commercial bank starting in the filing department, attending vocational school once a week to learn about bookkeeping and accounting which were their main activities, simple economics and principles of commercial law. The curriculum included courses Money. Breakdown and Breakthrough. Introduction in typing on a mechanical typewriter and stenography. The entitled Volkswirtschaftslehre with an appropriate subtitle bank trained me well in every department from bookkeeping to referring to theory and politics. treasury, investment securities, foreign exchange and consumer credit. After two and a half years I passed the professional The good professor informed us about Silvio Gesell’s (1862- banker’s examination and was a Bankkaufmann in the spring of 1930) Schwundgeld, money that would shrink in value over 1962, aged 22. I went to Zurich, Switzerland, in order to avoid time to force its circulation and thereby avoid depression. I the military draft of two years’ service in defense of western learned about Irving Fisher’s (1867-1947), the Yale professor’s, freedom and capitalism against eastern communism and exchange equation, which, simplified reads (the foundation of servitude in my divided country. American Express Bank in the equation is more complex) M · V = P · Q stating that the Zurich paid me well in recognition of my English language nominal amount of money in circulation (M) multiplied by its capability and newly acquired banking skills. velocity (V) being the average frequency with which a unit of money is spent, is equal to the price level (P) multiplied by an My banking career had lasted 15 years when I left the Bank of index of real expenditures on newly produced goods and Nova Scotia in Toronto, Canada, as a corporate credit officer in services (Q), which is intuitively understandable. charge of three western provinces to become a corporate controller for Sandoz (now part of Novartis) in Basel, I further learned that Irving Fisher was the brilliant author of the Switzerland, several years later an articled student of chartered famous “Theory of Interest” (1930), but not a single word about accounting in Vancouver, Canada, and eventually a certified his revelations on the causes of, and the remedy for, Booms and public accountant (CPA) in the State of Washington, USA. In Depressions (1932), written and published to explain the Great between I completed an MBA in Germany, and a PhD in Depression of the 1930s, and the creation and maintenance of a California. After running a private accounting practice, I retired, stable money supply called 100% Money (1935) with the teaching accounting & finance at universities in Bangkok, subtitle Designed to keep checking banks 100% liquid; to Thailand, and in Almaty, Kazakhstan. prevent inflation and deflation; largely to cure or prevent depression; and to wipe out much of the National Debt, or “The For a good half of my professional life I was of the opinion, Chicago Plan for Banking Reform” of 1933 which I discuss based on public knowledge, my training and education right up below. to MBA level, that good money was scarce, needed to be saved by households to be re-invested in productive capacity to John Kenneth Galbraith (1908-2006) — son of a Canadian dirt provide jobs and foster growth. I did not give it a second farmer from Ontario, accomplished economist at Harvard thought that the millions of marks, francs and dollars of University, U.S government price controller during WWII, and commercial and private loans authorized and made by my banks ambassador to India 1961-1963, whose rapport with President were not backed by pre-existing funds that had been entrusted to Kennedy was such that he regularly bypassed the State us — the typical fairy tale that Professor of economics, Dr. Department and sent his diplomatic cables directly to the Dieter Dahl (* 1930), taught and examined us on at Pforzheim President — laments the deficiency in education on the subject University. After all, the good professor, who had been a of money and financial history. He begins Chapter 1 of his banking apprentice himself at one time, had studied economics enlightening book on “Money, Whence It Came, Where It and had written a book about it, first edition published ca. 1969 Went,” (1975) with the sentences: 6 7 Money. Breakdown and Breakthrough. Introduction irrelevant and redeem much of the sovereign debts, putting an “It has long been fashionable for historians, except in the secret end to the misconceived and ruinous austerity programs, recesses of their belief, to be modest about the lessons of history.