Global financial system implosion begins

[Dr Jon]

Money Fleeing the US Financial System

 

[laptop]

Money Fleeing the US Financial System

Bonkers typography. I'll try not to dismiss it for that... ah, yer man Martin Armstrong has a colourful past and a bone to pick, having spent years in prison following what he says was a whistleblowing...

 

[elbows]

I don't care if his model gets some results, he is a dodgy git. And his wikipedia page reads as if it were written by him or one of his fans.

For a slightly more balanced and easier to understand profile of the man, try the following.

http://www.businessweek.com/news/20...rmstrong-released-after-11-years-in-jail.html

http://www.moneyweek.com/investment.../the-strange-case-of-the-jailed-market-genius

 

[Dr Jon]

Talking of dodgy gits, it transpires that the money juggling twats in the city have created a Möbius Strip of Fraud, yet it seems they still have their hands inside the Osborne / Cameron glove-puppets.

 

[ayatollah]

I liked (NOT) the bit on the "Rolling BBC news" today where in the "Exciting news on Splitting up bank functions" item the interviewer asked some big CITY bod why it was to take up to 8 years to divide the retail from the investment bank functions. "Oh it's just SO So complicated old boy ---- integrated IT systems, common ordering for bog rolls, common arrangements for office parties .... far too complicated to split up in 100 years never mind 8 ... and ALL TOGETHER NOW.... MUSTN't KILL THE GOLDEN GOOSE !!!!! he maundered on. EVEN the BBC bod was a tad unconvinced ! To misquote Churchill... "SOME FUCKING GOLDEN GOOSE... SOME FUCKING PILE OF GOOSE SHIT IT's DROPPED ON ALL OUR HEADS .. SOME FUCKING BRASS NECK !" FFS !

And all this time the UK state GUARANTEES the activities of all the financial wheeler dealers as well as the retail bits. Gawd... in 8 years time we could be using mouldy turnips for currency !

 

[Dr Jon]

8 years? They're taking the fucking piss.

Government should've guaranteed bank deposits and let the banks crash and burn, back in 2008.
I'll bet that would've cost a shitload less than they've blown they're blowing, baling out these Ponzi parasite vermin.

 

[ymu]

You appear to think our governments work for us.

 

[Dr Jon]

Ha ha.
That's what governments tell us!

As Frank Zappa said: Politics is a bunch of show and blow for people who don't understand; it is the entertainment branch of industry.

 

[teqniq]

I'm thinking 8 years gives them plenty of time to move all the most lucrative bits offshore.

 

[Nylock]

yep, 8 years is plenty of time to gut what's left of the economy and move the whole operation to the cayman islands

 

[love detective]

Their not even being split up, it's just a requirement for banks to internally 'ringfence' the retail parts from the other parts and to capitalise the retail parts at a higher level than the other parts. These retail parts will then be fully guaranteed by the state when the next crisis hits, and in theory the non-retail parts can be safely left to fail

The definition of what is retail however appears to be fairly fluid - which will allow banks to come up with ways to pack the 'ringfenced' retail bit with more and more dodgy stuff which will then benefit form the full support of the state as it has always had

The interconnectedness of the whole banking system however will mean this doesn't really change anything though - when the next crisis hits finance capital will get bailed out regardless of what formal structures are in place to theoretically allow parts of it to fail

 

[ska invita]

Anyone know why Lehman was allowed to fail?

 

[gosub]

cos Paulson didn't understand that chapter 11 wouldn't apply to Lehman's London offices, so he thought the situation could be gently put to bed.

 

[gosub]

Italy and Spain are going to chip in over 30 billion to the fund for bailing out Italy and Spain

 

[Barking_Mad]

Good article by Golem

Plan B – How to loot nations and their banks legally
By Golem XIV

Is there a plan B? That question is usually asked of governments regarding their attempts to ‘save’ the banks domiciled in their country. But has anyone asked if the banks have a plan B?

Does anyone think that if our governments fail to keep to their austerity targets and fail to keep bailing out the banking sector, that the banks will just shrug and say, “Well, thanks for trying” and accept their fate? Or do you think the banks might have a Plan B of their own?
First let’s be clear about Plan A. That plan is to enforce an era of long-term austerity cuts to public services, in part to cut public expenditure so as to free up money for spending on the banks, but perhaps more importantly to further atrophy public services so that private providers can take over. A privatization of services which will bring great profits and cash flow to the private sector and to the banks who finance them, and a further general victory for those who feel that private debts rather than public taxes should be what underpins our national life and social contract.
Plan A therefore requires that governments convince their populace that private debts should be taken on to the public purse and that once taken on, the contracts signed by governments on behalf of the tax payers/citizens, are then sacrosanct and above any democratic change of mind. If governments can hold their peoples to this,then the banks are ‘saved’ with the added bonus that democracy and the ‘Rights’ it once guaranteed will all have been redefined as subordinate to finance and its contracts, and our citizenship will have become second to one’s contractual place in a web of private debts. Debts to the private lenders will become more important than taxes to the public exchequer. And as they do the State will wither away, leaving free-market believers and extreme libertarians exactly where they have always wanted to be – in charge – by dint of being rich. It is, in my view, a bleak future which I once described as A Toxic Debt Wasteland.

BUT it does all depend on governments being able to suppress discontent and to outlaw opposition in the sense of saying to people you may disagree but we have now declared these debts and their repayment to be outside democratic control and immune to any attempt to rescind or repudiate the agreed debt contracts. As the severity of the austerity cuts to social services (health, education, pensions etc) becomes painfully clearer to people and the ‘necessity’ for them is ‘regretfully’ extended year after year, it will become harder and harder to justify, let alone impose, such suffering. We will enter an era of vicious sectarian blame. We are already in it, but it will get much darker.

 

[gosub]

 

[Falcon]

Keen points out that UK Office of National Statistics is one of the worst in the world. So figuring out what the UK's debt level is problematic. Morgan Stanley have worked it out. UK debt is nearly 10 times its GDP. Since we are the centre of the global finance ponzi scheme (far more than the US), it's only a matter of time before the vigilantes take us down (remember John Major?)

It explains the apparent prosperity of recent decades - the sleek 50 somethings currently swanning round the golf course achieved their suntanned retirement by maxing out the country's credit card, stuffing their infants with the bill. Charming.

Expect a French style credit agency derating, with all that follows.

Source: via Steve Keen's Debtwatch

 

[ayatollah]

Yet again, this time from Falcon, we are expected to buy into the COMPETELY BOGUS idea that "ALL OF US in the 50 or so age group , collectively had such a good time on credit for 30 years or so that we ALL bust the economy and shouldered our offspring with debt for ever more. This is right wing ideological bollocks !

Since the 1970's in Europe and the USA there has been a vast transfer of wealth from the majority of citizens to the top 5% or so, as crushed union power led to MOST working people failing to keep their wages share of the national cakes up to the shares taken in executive salaries , profits, bonuses, dividends etc. This is all very well documented. MOST people then kept their living standards up by hugely increased levels of borrowing - aided by the long term housing/property boom bubble. It was the huge scale long term ROBBERY of the wealth of society by the elite ,combined with their out of control financial chicanery and speculation - plus the inevitable fall in the RATE OF PROFIT, which this transfer of wealth from poor to rich was designed to mediate, which has brought about the classic 2008 world economic crisis. It is a systemic capitalist crisis , caused by an out of control financial system, not the fault of the MAJORITY of us --- we are collectively the VICTIMS , NOT the villains here FFS !

 

[yield]

Very true ayatollah. Debts have increased as wages have declined.

There was a radio 4 show with Paul Mason about credit last year.

We expected people to be spending them on high days and holidays, high street consumption, cars, all of these kinds of things. We also expected people to be reinvesting it into their homes - getting their gutters repaired, their roofs repaired and so on.

But actually what we found is that all of those kinds of expenditures declined over the 17 year period that we were able to look at the data, and what was increasing were other kinds of expenditure - all of which seemed to us
to be about propping up family welfare, about bridging short drops in income, about meeting the financial shocks of unexpected life events like divorce and separation or health problems or anticipated unemployment and so on.

So people were really using this money to boost their subsistence spending, to manage from day to day and to meet welfare needs.

Professor Susan Smith. Social Geographer, Cambridge University. transcript

 

[Falcon]

Yet again, this time from Falcon, we are expected to buy into the COMPETELY BOGUS idea that "ALL OF US in the 50 or so age group , collectively had such a good time on credit for 30 years or so that we ALL bust the economy and shouldered our offspring with debt for ever more. This is right wing ideological bollocks !

A moment's quiet reflection on the logic of your statement would show that, for it to be true, I would have to have suggested that everyone in the 50 or so age group is swanning around a golf course.

You appear to be constructing the argument you want to hear, and filling in your own details. And those details are a little odd - in what way is the illusionary, debt-financed growth in value of my working class parents house from £12,000 to £290,000 (the encashment of which now funds their early retirement and bi-annual cruises) evidence of the ROBBERY of the wealth of society by the elite? In what way has the young family that will oversee the reversal of its value from £290,000 to something more representative of the value of its materials *not* funded my parent's lifestyle?

Rather torturing the evidence, I'd say.

 

[yield]

Income inequality in America
The 99 percent
The Economist. Oct 26th 2011

Of all the many banners being waved around the world by disgruntled protesters from Chile to Australia the one that reads, "We Are the 99%" is the catchiest. It is purposefully vague, but it is also underpinned by some solid economics.

 

[Sunray]

Today I see suggestion that the Greek and Italian people are draining their deposits from their banks.

This is amounting to long drawn out run on the banks. Banks have been told to increase their tier 1 capital which clearly is gonna be hard if people are taking it all out.

This will undermine their banks and may well end the Euro.

 

[contadino]

Today I see suggestion that the Greek and Italian people are draining their deposits from their banks.

Well? In their shoes, wouldn't you? It's back to basics again. The banks don't trust each other (as demonstrated by low inter-bank lending), so why should the average Guseppe trust them? If they fail, it'll be the fault of the banks for not underwriting their risk, not the fault of depositors.

 

[Sunray]

I would as well, especially Greece because people are putting their children into care there as they can't afford to pay for them any more. They are the country most likely to exit the euro, so having all your money in a german bank is going to be logical thinking. I'd have it in US dollars or Sterling.

 

[ymu]

It explains the apparent prosperity of recent decades - the sleek 50 somethings currently swanning round the golf course achieved their suntanned retirement by maxing out the country's credit card, stuffing their infants with the bill. Charming.

Expect a French style credit agency derating, with all that follows.

Source: via Steve Keen's Debtwatch

Nonsense.

Firstly - future generations are not being saddled with our debts, because those debts are mostly also in the form of assets that they own. We owe nearly all the debt to ourselves - this is true in the UK and in the US.

Secondly, US bond yields went down when they were downgraded, and there's no reason for us to expect any different. Japan has massive national debt and very low yields. Every rich indebted country with its own printing press is in the same position. The Eurozone countries are in a very different position because they have no control over their own currencies. Comparisons between France and the UK, or any of the PIIGS and the UK, are nonsensical because we have our own central bank and they don't.

Spain was running a surplus before the crisis, and Ireland was very nearly in surplus. This has fuck all to do with government spending and everything to do with transforming a banking crisis into a sovereign debt crisis via the medium of a bailout which did nothing but line the pockets of the bankers whose incompetence and greed caused the crisis in the first place. The level of debt doesn't matter very much. You need to listen to some real economists, not the moronic architects of this situation.

 

[ciaoant1]

"If China," says Mr. Stapleton, M.P., to his constituents, "should become a great manufacturing country, I do not see how the manufacturing population of Europe could sustain the contest without descending to the level of their competitors." (Times, Sept. 3, 1873, p. 8.).

source

 

[Dr Jon]

Just spotted As Economic Growth Fails, How Do We Live?
An interesting summary of our predicament and an exploration of what comes next.

 

[Falcon]

Nonsense. We owe nearly all the debt to ourselves - this is true in the UK and in the US.

Sadly you (and Mr Krugman) are confusing public debt and public liability. (More accurately, Krugman is omitting public liability). Public debt is a legal contract. Public liability is a moral contract. Government bonds, gilts, etc. are public debt and cannot (easily) be defaulted. Pension, healthcare and social security is a public liability, can be defaulted, and will. People are entitled to a debt. People think they are entitled to a liability. It's worth a quiet moment of reflection to ponder the implications.

Proportions? US debt is $14 trillion. US liability is $200 trillion.

Pension funds hold public debt instruments (your splendid graphs), but the pension liabilities far exceed their public debt components - the difference was supposed to be made up by stock market i.e. energy growth, and the contributions of the next generation enriched (like the current crop of Snow Birds) by the fruits of an expanding economy. We owe nearly all debt to ourselves. We owe nearly all liability to the previous generation. Mr Krugman's graph rather unfortunately omits any allowance for your pension and your old age healthcare and Hospice costs. Your references are accurate -- and irrelevant.

But I'm obliged for your thoughts on which economists I should subscribe to.

 

[taffboy gwyrdd]

Even better than usual. If you aint keep track of The Keiser Report you are missing the best detail on the banking heist by far. On top of the usual laughs this edition also has author of "It Takes a Pillage" - former Goldman Sachs exec Naomi Prinz. Fantastico. However fraudulent, disasterous and disgusting you think they are, Max always has the detail on how things are probably even worse.

http://www.youtube.com/watch?v=vu1RphS7HFE&feature=player_embedded

 

[Falcon]

I'm not sure what is more interesting - France's credit rating downgrade, or France's finance Minister thinking its comparable to a 20/20 student getting 19/20.

Now the creditor pool has significantly shrunk, since most serious institutions cannot borrow from sub-AAA rated sources and France was large. El-Erian thought it was a little more serious than that back in September:

These are all signs of an institutional run on French banks. If it persists, the banks would have no choice but to delever their balance sheets in a very drastic and disorderly fashion. Retail depositors would get edgy and be tempted to follow trading and institutional clients through the exit doors. Europe would thus be thrown into a full-blown banking crisis that aggravates the sovereign debt trap, renders certain another economic recession and significantly worsens the outlook for the global economy.
- FT, 22 Sep 2011