 Good morning, can you hear me well? So good morning to everyone. It's a great pleasure to be here. Thank you very much for the invitation. I will talk about Fed and ECB, Banksterism, compared. So I will compare the Fed and the ECB, other differences and are they important? Also indicate how this may be reported for the future. As we already have seen in Professor Hoppe's speech, the main purpose of or one main purpose of central banks is to finance governments on cost of the general population that loses in purchasing power. So the ECB and the Fed use slightly different ways to finance governments and also different quantities which is resultant of slightly different philosophies. First of all, what are the similarities? Well, both are the owners of the printing press and produce base money, the monetary base. And on this monetary base, the Fraction Reserve Banking System expands the credit structure, creates fiduciary media. So cash and central bank reserves are produced by the central bank, and then the banking system erects upon, on top of it, the credit structure. So the ways are slightly different. Let's first look on the Fed. The Fed uses what it calls open market operations to manipulate the interest rates, the federal funds' target rate, and they always emphasize, put the emphasis on the interest rate. We will raise or lower the interest rate and not on the way they are doing it by changing the increase in the money supply. So they divert attention from money production to the interest rate. And there are two main ways the Fed does it. The first one is produce money and lend or loan out. So they produce money and then they lend it to banks. This can be done by repurchase agreements and repurchase agreements the Fed buys a loan from a bank and then sells it back later at a higher price. And the difference is then the interest rate, similar collateralized lending there. The Fed gives a loan to a bank and the bank has to provide a collateral, a guarantee to the Fed. And those are called short term. And the other way that the Fed uses more intensely is produce money and buy. So they produce money and buy government bonds. And of course there is no term involved in it. So these are the operations that the Fed uses to manipulate the interest rate and then there's also the discount win-low which has another purpose. The purpose is to help out banks with short term liquidity problems. The initiative is on part of the banks that approach the Fed and ask for overnight, an overnight loan at a penalty rate. So this is basically how the Fed operates. And the ECB has also open market operations. They also produce money and buy bonds program but they don't usually use it or didn't use it. And most importantly they use the produce money and lend program with repurchase agreements. There they have different facilities, different programs with different maturities, the long term refinancing facilities and main refinancing facilities, the structural refinancing facilities, the financing facility. It reminds one very much of social engineering of this different kind of facilities. Understanding facilities are similar to the facility of the Fed, the discount win-low. There's a marginal lending and the deposit facility where banks can lend overnight or deposit money overnight at the ECB. So you see it's basically the same, different names, just different names for the same thing. The main difference is that the Fed concentrates to manipulate the money supply on produce money and buy, buy government bonds and ECB produce money and lend, that's the main difference. How does it look this difference on the balance sheet? It's a simplified balance sheet of the Federal Reserve. We have here on the SS side government bonds, gold, foreign exchange reserves, on the liability side, monetary base, bank notes and reserves that banks hold at the Fed. So what do they do to increase the money supply? They buy government bonds from banks. Then happens this, they buy 50 dollars government bonds and then reserves increase 50 and thereby the base money, the bottom part of the inverted pyramid increases 50 dollars. ECB is a simplified balance sheet of the ECB. On the SS side the loans to banks, gold, foreign exchange are the same and notes and bank resources. How does the ECB increase the monetary base? Well, it gives more loans and produces money and lends out, loans out, so the loans increase. So you see, this is the main operational difference. So now I want to explain how the banking system erects on top of this increase in base money and this inverted pyramid of credits. This is a balance sheet of a commercial bank that has a reserve ratio of 10%. Deposits 100 and cash the reserve 10. I say capital 100 loans, 90 government bonds 100. The ECB now increases the money supply. It gives a loan to the bank. It's on the liability side, loan from the central bank 100. And on the SS side, the bank has now new reserves. So now the bank has 110 in reserves and 100 in deposits, so it has free reserves. Can give more loans. Alternatively, one thing important here is also that the loan from the central bank requires a collateral. And the collateral in this case will be of course the government bonds. In the Fedway, the bank sells the government bonds directly to the Fed and receives new reserves. The same thing happens, that cash and reserves are 110 and deposits 100, so we have free reserves. Now let's look how this multiplies. Bank A, then the upper left corner. Yeah, we have the new reserves of 100 and with the loan of the central bank. And now the bank has three reserves of 100 and 90% it lends loans out to customer Y and puts it on his bank account. So the deposit of customer Y is 90. Of course Y asked for the loan for some purpose so he will use the money. For example, he pays set. He withdraws his money. You see it on the right, bank A, the deposit disappears and the reserves are reduced. The bank A has now a reserve ratio of 10%. So Y pays set this 90 monetary unions and set deposits to 90 monetary units in his bank, bank B. So we see there that 90 reserves of 90 monetary unions enter bank B and set gets a deposit of 90. So now bank B has three reserves and 90% of it will lend out 81 monetary unions. Loans it to X and puts it on his bank account 81 and X uses the money to pay B, withdraws the money. So there's a bank B, the money is withdrawn, the deposit to X disappears and reserves are reduced by 81, reserves nine. And X and B deposits the money in his bank and bank C and bank C in turn also can give a loan of 90% to you of 72.9 monetary unions. And so on and so on. You'll see that from the initial 100 new reserves resulting from the loan from the center bank, you get finally 1000 new deposits. So the money supply has increased which is 10% reserve ratio, 1000 monetary units. So you see the impact that the increase in base money initially by the central bank of 100 has on the money supply. This is the inverted pyramid from the beginning. Now, who's the main beneficiary of this whole process? Who gets the new money first? Well, the banks receives the new reserves first and can then reduce the user made intermediary but also the government of course benefits because the banks buy government bonds. Why do they buy the government bonds? Because the Fed buys them directly and the ECB accepts them as preferred collateral. So the government can use the system to finance its expenditures. Let's assume that the government as often occurs spends more than it receives in Texas. For the differences it prints just government bonds. The banking system, that's the case of the ECB, is willing to buy these bonds because the banking system knows that the ECB against this collateral is willing to give them new loans, new reserves. So it provides the bonds as collateral to the ECB and the ECB gives new reserves to the banking system and then starts the process that we have seen before, the bank multiply. But one thing is missing here, the interest. The government has to pay interest on their bonds to the banking system that is the legal owner of the bonds and the banking system has to pay interest on the loans it receives from the ECB and the ECB returns the profits to the governments at the end of the year. So it's not really just a set that hurts very much because you just print paper bonds or you don't print them, you just create them electronically. The interest to a great measure flow back to you and when the bonds comes to you, you print new bonds to substitute the old bonds. So from this, you can imagine that banks hold much government debt. In fact, they hold two trillion euros of government bonds in the EU and this is 30% or almost 30% of all your error debts are held in banks. In comparison to the US, it's only 11% and this can be explained easily with what we said before in the US, the Fed tends to buy the government bonds and the governments are on the balance sheet of the Fed while in the EU area, the banks just buy the government bonds and pledge them as collateral to receive the loans. So the Fed way is slightly different. We have again that the government spends more than it receives in Texas. If you respond to the difference, gets money from the banking system and the banking system now sells the bonds or the Fed purchases them in open market operations in exchange for reserves and now the Fed is the legal old law of the bonds. So the government has to pay the interest to the Fed. The Fed remits the maturity back from our profits. So again, a very nice way to finance your expenditures. Economically, it's very similar. This produce money and land to produce money and buy or purchase. In both cases, the base money supply increases and the case of the ECB, the base money supply increases until the loan is not rolled over, not renewed at the end of the new loan or be reversed if it's not renewed. And in the case of the Fed, it's the same. The money supply increases until the bond is sold if the Fed would sell the bond back to the banking system, it would drain with us. So the difference is more legally that in the European monetary union, the bonds remain the property of the banks. So the government bonds are off the balance sheet of the central bank. They are on the balance sheet of banks. As we have seen, 30% of government bonds are held by banks. But in both cases, the government bonds are effectively monetized. So, therefore, Greece was not the first time bailed out in May 2010 or when the ECB started to buy government bonds but all the time when the ECB started from the very beginning to accept government bonds as collateral because it amounts to the same thing. And of course, the ECB continues to accept Greek bonds as collateral even though they accept it. Even though they are rated as junk by the rating agencies, same happens with Irish debt. So now, this is of course only part of the monetization of the government deficit. There's another part which is more hidden. You have seen the government bonds are prepared for collateral by the ECB or the Fed buys government bonds. That makes government bonds very liquid. Almost, it's almost as good as money because if you're a bank and you have government bonds, it's very easy to get a new base money, new reserves. So it's a very liquid market and this leads to a second indirect monetization of the government debt. So again, the same thing, the government issues bonds, get, sells it to the banking system. In case of the ECB, bonds are pledged as reserve, as collateral and the banking system receives new reserves. Then happens what we saw before the credit expansion. The fraction reserve banking system increases the money supply. In our example, it's multiplied the initial increase 10 times. It gives loans to entrepreneurs who then pay their factors of production or the owners of the factors of production workers and so on. And the workers, some of the money they invest in hedge funds, intention funds, for their insurances and the insurances by also government bonds. To a great extent, why? Because they are so liquid. Rating aid, there's also regulation that pushes this regulation two and three that regards government bonds as the less risky asset. So you see that indirectly, not only is it direct by the banking system, buying the government bonds, but also indirectly that the banking system creates new money and this new money ends up due to the privileges of government bonds, buying these bonds indirectly monetizes the government deficit. So in the Euro area, 30% are held by banks and the youth percentage also by this investment devices and of course also another source that holds government bonds are other central banks. You could use money and buy foreign government bonds. The most paradigmatic cases are of course China and Japan that hold US government bonds. So this is the way to finance your deficit, to monetize it. So now, question is who's the bigger banks? Fed or the CV? So the methods are slightly different operationally but economically amount amounts to the same but who's really the most dangerous criminal? From another. We can look at indirectly by looking at how high is the deficit that is monetized directly and indirectly and here we see that the US government deficit is higher than the Euro area deficit or the German money, substantially higher. This would indicate that the bigger bank star behind this deficit is the Fed. We can also look more directly on the balance sheet of the Fed, represents space money. We see this is from 2007 to today, a few days ago. And there we see that the Fed's increased base are almost quadrupled, more than quadrupled, its balance sheet from 800 billion to 2.7 trillion. Compared to the ECB's balance sheet, this has been expanded less, it has not doubled from 1.2 trillion to 1.9. The direct monetization of by produce money and by government bonds, we see this quantity is in one and two, we see that US Treasuries have increased from its low 1 trillion dollars. Comparison the ECB is only its one-tenths or a little bit more than one-tenths is 138 billion. Of course this is also explainable through the different operations. As I said, the Fed to increase the money supply, they buy Treasuries. Therefore the Treasuries increase so much on the ECB on the Fed's balance sheet. While the ECB doesn't do it normally, they only started it really in May 2010 with the Greek bailout, what they do is they produce money and lend it against collateral, so this is not so surprising that the ECB is so much lower. So let's look at the difference for philosophy. The Fed indeed has an inherently slightly more inflationistic inflationary philosophy because its mandate is, it has two mandates to maintain price stability, which is of course defined as zero, increases of their manipulated statistics but higher to have a buffer against inflation. So they have this, unquote, price stability and full employment. So this, even from their theoretical perspective, these goals can be in conflict and so they might reduce interest rates, increase the money supply in order to, what they think, to produce or reduce unemployment. While the ECB has only one mandate that is price stability and only if price stability is achieved, then the ECB can help with other policies of the EU. And then the institutional setup or the institutional history also plays an important role. Benenki, the president of the Fed, most of his scholarly work is on the Great Depression and his main point or his more main finding is that the Great Depression was so great, so horrible because the Fed didn't produce enough money. So you could have expected what he did after the collapse of Lehman Brothers and you can't expect what he will do in the future. So this is the mindset of Benenki whether the ECB, which is more in the tradition of the Deutsche Bundesbank, that is one of the less inflationary center banks in the world. Of course, now you might be surprised because in my book, The Treasury of Theory, I write that the ECB was essentially installed to get rid of the discipline of the Bundesbank to eliminate the Bundesbank. Yes, that's true, but you cannot do it immediately. You have to do it very carefully and step by step. So the ECB still needs to appear to be in the Bundesbank tradition, at least to appease Germany because otherwise they would risk that Germany would exit in monetary union, it would be a disaster for them, of course. However, there are slightly slight, there's more differences in their philosophy and we can already see this in the actions of the central banks, the US and the US interest rates are still close to zero while the ECB has already raised interest rates for 1% to 1.25%. So also this indicates into the direction that the Fed is the bigger bangster. One specific problem of the EMU, European Monetary Union, is of course how to share the loot of the bangster. In fact, the EU system is about to fall apart due to this conflict of how to share the loot. Of course, the problem is here that several governments can use the process that I described before. So several governments can hire the banks that ECB to finance their deficits. They try to install a government carter to limit the amount that the bangster could be used. This is stability and prospect that limited. The idea was to limit the deficits to 3% of GDPs or put a strict limit on the use of the bangster. But at the end it was not enforceable, mainly because independent governments judged on themselves and they didn't enforce penalties on each other. So that is what I argue in my book, a tragedy of the commons. There are several users, several governments that may use one bangster or one money producing machine, the ECB, to finance the deficits, which has led to this high deficits. So to come to the conclusion, the Fed is apparently more inflationary because it's beside price stability, it has also the mandate to provide full employment. However also the ECB sets aside the price stability mandate when it comes to saving the political project of the euro. This project and the problems of the euro come about by effectively the problem of how to distribute the loot. The 3% distribution hasn't worked, so it's about to fall apart. So I've also taken into account that the ECB's behavior is conditioned by the considerations of the political project of the euro. But there's no difference of class between the two bangsters, but just of degree. And the Fed is the slightly bigger bangster. So to sum up all of this in one picture, which often says more than words, I end with this. Thank you very much.