Tag Archives: Banks

Farewell to Paper Money? by Jeff Thomas

Governments want money to be all electric, so that they can keep track of it and what people do with it, and so they can keep it in banks should the banking system run into trouble (they call it a bail-in). From Jeff Thomas at internationalman.com:

A decade or more ago, I began to discuss with associates the possibility of governments and banks colluding to eliminate physical cash. Back then, the idea struck most everyone as poppycock, that governments could never get away with it.

I didn’t write on the subject until 2015, when several countries had begun to limit the amount of money a depositor could extract from his bank account. At that point, the prospect that central banks might conceivably eliminate cash was looking less like an alarmist fantasy, and it became possible to write on the nascent issue.

In a nutshell, today, in most of the world’s most prominent countries, the people who control banking are the same people who pull the strings in government. A cashless system therefore seemed to me to be a natural, as it dramatically increased both profit and power for both banking and government – an opportunity that can’t be passed up.

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About Trump, by Sylvain LaForest

Is there method to President Trump’s madness? That’s a question people have been asking for the last three years. Sylvain LaForest claims there is. From LaForest at orientalreview.org:

The timing is right for everyone to understand what Donald Trump is doing, and try to decrypt the ambiguity of how he is is doing it. The controversial President has a much clearer agenda than anyone can imagine on both foreign policy and internal affairs, but since he has to stay in power or even stay alive to achieve his objectives, his strategy is so refined and subtle that next to no one can see it. His overall objective is so ambitious that he has to follow random elliptic courses to get from point A to point B, using patterns that throw people off on their comprehension of the man. That includes most independent journalists and so-called alternative analysts, as much as Western mainstream fake-news publishers and a large majority of the population.

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Fed Pays Banks $30 Billion on “Excess Reserves” for 2017, by Wolf Richter

This should disabuse any remaining innocents of the quaint notion that the Federal Reserve isn’t a tool of the banks. From Wolf Richter at wolfstreet.com:

At taxpayer expense: easiest, risk-free, sit-on-your-ass profit ever.

The Federal Reserve’s income from operations in 2017 dropped by $11.7 billion to $80.7 billion, the Fed announcedtoday. Its $4.45-trillion of assets – including $2.45 trillion of US Treasury securities and $1.76 trillion of mortgage-backed securities that it acquired during years of QE – produce a lot of interest income.

How much interest income? $113.6 billion.

It also made $1.9 billion in foreign currency gains, resulting “from the daily revaluation of foreign currency denominated investments at current exchange rates.”

For a total income of about $115.5 billion.

Those are just “estimates,” the Fed said. Final “audited” results of the Federal Reserve Banks are due in March. This “audit” is of course the annual financial audit executed by KPMG that the Fed hires to do this. It’s not the kind of audit that some members in Congress have been clamoring for – an audit that would try to find out what actually is going on at the Fed. No, this is just a financial audit.

As the Fed points out in its 2016 audited “Combined Financial Statements,” the audit attempts to make sure that the accounting is in conformity with the accounting principles in the Financial Accounting Manual for Federal Reserve Banks.Given that the Fed prints its own money to invest or manipulate markets with – which makes for some crazy accounting issues – the Generally Accepted Accounting Principles (GAAP) that apply to US businesses to do not apply to the Fed.

This annual audit by KPMG reveals nothing except that the Fed’s accounting is in conformity with the Fed’s own accounting manual.

Here is what the banks Get:

The Fed pays the banks interest on their “Required Reserves” and on their “Excess Reserves” at the Fed. Excess Reserves are the biggie: As a result of QE, they jumped from $1.7 billion in July 2008, to $2.7 trillion at the peak in September 2014. They’ve since dwindled, if that’s the right word, to $2.2 trillion:

To continue reading: Fed Pays Banks $30 Billion on “Excess Reserves” for 2017

Big Banks Are All Over Blockchain, by Don Quijones

The blockchain “revolution” is going mainstream. From Don Quijones at wolfstreet.com:

To process derivatives, currency trades, transactions, etc. Just don’t call it cryptocurrency. It’s a “digital currency.”

As a general rule, most bankers disparage cryptocurrencies, like Bitcoin, as anything but purely speculative instruments. But they don’t disparage blockchain, the technology that underpins cryptocurrencies. On the contrary. They’re pouring money into developing their own “digital currencies,” as they call them. Just don’t call them “cryptocurrencies.”

UBS, BNY Mellon, Deutsche Bank, Santander, the market operator ICAP, and the startup Clearmatics formed an alliance in 2016 to explore the use of digital currency between financial institutions and central banks, using blockchain technology — the open-source software that underpins cryptocurrencies.

The ultimate goal of the project is to create a digital currency known as Utility Settlement Coin (USC), which will facilitate payment and settlement for institutional financial markets. As the FT reported in October, commercial banks are growing tired of waiting for central bankers to take the lead in fending off the challenge that standalone cryptocurrencies such as bitcoin could pose to their control of monetary policy, and are pressing on with their own pet projects.

According to Deutsche Bank’s website, USC is “an asset-backed digital cash instrument implemented on distributed ledger technology for use within global institutional financial markets.” It consists of a “series of cash assets, with a version for each of the major currencies (USD, EUR, GBP, CHF, etc.) and is convertible at parity with a bank deposit in the corresponding currency.”

It’s easy to see the attraction blockchain holds for big banks like Deutsche, UBS and Santander: Combining shared databases and cryptography, the technology offers multiple parties simultaneous access to a constantly updated digital ledger that cannot be altered. With it, banks could offer a safer, faster, cheaper, more transparent service to their customers, while doing away with the need for a central operator.

Settlements could be executed almost instantaneously on a bank-by-bank basis rather than having to be netted at the end of each working day by the respective central bank. The subsequent cost savings could be huge.

 To continue reading: Big Banks Are All Over Blockchain

Is the Global Taxman Coming? by Don Quijones

Will it be before or after cash is eliminated that a global taxing authority is established? From Don Quijones at wolfstreet.com:

But who are they really going after?

Credit Suisse is once again under international investigation for allegedly helping its clients evade the prying eyes of national tax authorities. This comes after the bank was fined $2.6 billion by the U.S. government in 2014 for helping Americans evade taxes.

Helping high net worth private clients and corporations evade taxes, and then getting caught is not unique to Credit Suisse. Fellow Swiss megabank UBS and UK giant HSBC were fined hundreds of millions of dollars for their troubles.

The banks are not just helping their clients evade taxes. In a report titled Opening the Vaults, UK-based charity Oxfam International revealed this week that in 2015, Europe’s 20 largest banks registered over a quarter of their profits in tax havens – well out of proportion to the level of real economic activity that occurs there. Once again, Luxembourg was a top destination for funds, while in Ireland the same banks recorded profits that were 76% higher than the global average in 2015. Only the Cayman Islands was found to have a higher profitability rate.

None of this should come as a surprise. If any organization knows how to bend the rules and use and abuse the tools and levers of global finance to minimize a company or individual’s tax “footprint,” it’s today’s generation of global banks. And no matter how many fines they are made to pay, they’re not going to change their ways.

And that is bad news for today’s governments, which need increasing amounts of money to meet their obligations and service their debts, as well as rescue the banks every time they get in trouble. It is also bad news for regular taxpayers since they will have to make up the difference, until that’s no longer possible.

To continue reading: Is the Global Taxman Coming?

 

Italy at the Grim Edge of a Global Problem, by Don Quijones

You may be tired of hearing about Italy, but it’s only going to get worse. From Don Quijones at wolfstreet.com:

This trend is not your friend.

To be young, gifted, educated and Italian is no guarantee of financial security these days. As a new report by the Bruno Visentini Foundation shows, the average 20-year-old will have 18 years to wait before living independently — meaning, among other things, having a home, a steady income, and the ability to support a family. That’s almost twice as long as it took Italians who turned 20 in 2004.

A Worsening Trend

Eurostat statistics in October 2016 showed that less than a third of under-35s in Italy had left their parental home, a figure 20 percentage points higher than the European average. The trend is expected to worsen as the economy continues to struggle. Researchers said that for Italians who turn 20 in 2030, it will take an average of 28 years to be able to live independently. In other words, many of Italy’s children today won’t have “grown up” until they’re nearing their 50s.

That raises an obvious question: if Italy’s future generation of workers are expected to struggle to support themselves and their children until they’re well into their forties, how will they possibly be able to support the burgeoning ranks of baby boomers reaching retirement age (a staggeringly low 58 for men and 53 for women), let alone service the over €2 trillion of public debt the Italian government has accumulated (and which doesn’t include the untold billions it hopes to splash out on saving the banks)?

The trend could also have major implications for Italy’s huge stock of non-performing loans, which, unless resolved soon, threatens to overwhelm the country’s banking system. If most young Italians are not financially independent, who will buy the foreclosed homes and other properties that will flood the market once the soured loans and mortgages are finally removed from banks’ balance sheets?

To continue reading: Italy at the Grim Edge of a Global Problem

 

Banks Are Evil, by Adam Taggert

Adam Taggert makes a strong case that modern banking and bankers are indeed evil. From Taggert at peakprosperity.com:

It’s time to get painfully honest about this

I don’t talk to my classmates from business school anymore, many of whom went to work in the financial industry.

Why?

Because, through the lens we use here at PeakProsperity.com to look at the world, I’ve increasingly come to see the financial industry — with the big banks at its core — as the root cause of injustice in today’s society. I can no longer separate any personal affections I might have for my fellow alumni from the evil that their companies perpetrate.

And I’m choosing that word deliberately: Evil.

In my opinion, it’s long past time we be brutally honest about the banks. Their influence and reach has metastasized to the point where we now live under a captive system. From our retirement accounts, to our homes, to the laws we live under — the banks control it all. And they run the system for their benefit, not ours.

While the banks spent much of the past century consolidating their power, the repeal of the Glass-Steagall Act in 1999 emboldened them to accelerate their efforts. Since then, the key trends in the financial industry have been to dismantle regulation and defang those responsible for enforcing it, to manipulate market prices (an ambition tremendously helped by the rise of high-frequency trading algorithms), and to push downside risk onto “muppets” and taxpayers.

Oh, and of course, this hasn’t hurt either: having the ability to print up trillions in thin-air money and then get first-at-the-trough access to it. Don’t forget, the Federal Reserve is made up of and run by — drum roll, please — the banks.

How much ‘thin air’ money are we talking about? The Fed and the rest of the world’s central banking cartel has printed over $12 Trillion since the Great Recession. Between the ECB and the DOJ, nearly $200 Billion of additional liquidity has been — and continues to be — injected into world markets each month(!) since the beginning of 2016:

To continue reading: Banks Are Evil