Global financial system implosion begins

[TitanSound]

Detroit has, inevitably, ceased to function (source). It is the largest US city (so far) to file for bankruptcy - other, larger cities, are functionally insolvent and being sustained by synthetic debt creation.

Health care, pensions and bond markets are serious casualties. Police don't respond to calls (the average response rate masks non-respondents). 78,000 abandoned buildings. Tripled unemployment rate, record murder rate.

They are filing for "chapter 9" bankruptcy, but the US is withholding Federal assistance - how can the insolvent assist the insolvent?

Little peep into the future.

 

[teqniq]

Some interesting ideas and analysis concerning Detroit from Juan Cole here. Unfortunately I can't see global capital buying into some of the more novel ones.

 

[Crispy]

Omni Consumer Products has had a corporate restructuring imposed on it and has fired half its workforce in order to get a government bailout. Capital intensive divisions such as the promising cybernetic and robotic law enforcement projects have been shut down and their assets sold off.

 

[TitanSound]

Capital intensive divisions such as the promising cybernetic and robotic law enforcement projects have been shut down and their assets sold off.

Sad. Face.

 

[Dr Jon]

Just spotted Chris Martenson's latest blog entry:
Bankers Own the World

Today, some of the most celebrated individuals and institutions are ensconced within the financial industry; in banks, hedge funds, and private equity firms. Which is odd because none of these firms or individuals actually make anything, which society might point to as additive to our living standards. Instead, these financial magicians harvest value from the rest of society that has to work hard to produce real things of real value.
While the work they do is quite sophisticated and takes a lot of skill, very few of these firms direct capital to new efforts, new products, and new innovations. Instead they either trade in the secondary markets for equities, bonds, derivatives, and the like, which perform the 'service' of moving paper from one location to another while generating 'profits.' Or, in the case of banks, they create money out of thin air and lend it out – at interest of course.

Martenson goes on to say:

Today the top fifty companies in the 'super-entity' list of 147 from the above study is concerning. Out of the fifty, 17 are banks, 31 are an assortment of investment, insurance, and financial services companies, and only 2 are non-financial companies (Walmart and China Petrochemical)

Top 145 companies now money-juggling parasites. No wonder the world's turned to shit.


I was recently talking to an old workmate from the 1980's: we were counting all the big engineering companies that have gone: Fairey, Simon, Ferranti, Plessey, GEC, Metro-Vickers, Mirrlees-Blackstone... Even the mighty ICI carved up and sold off to mostly foreign competitors.
Sir John Harvey-Jones will be spinning in his grave...

However politicians and the PR agencies spin it, money-juggling is NOT an industry. The wealth "created" by these financial parasites is illusory (or stolen from people who actually make things) and has no foundation in real world.



/rant

 

[Dr Jon]

Bank of England refuses comment on huge discrepancy in custodial gold reports

 

[Dr Jon]

A similar rant against the parasites from the Renegade Economist

...
In this ignoble war the aggressors are the rent-seeking predators who we tolerate in the so called 'capitalist' system. They are often camouflaged by the mainstream media as wealth creators. Do not be fooled. The defendants are the producers – these people can be defined as those who work in the real economy, create actual products, services and experiences that add real, tangible value. The producers add value the predators extract that value – mercilessly. That is the war: Value Producers vs. Value Extractors and central policy - helped by mainstream media – implicitly creates rules of engagement albeit subtly.

Interesting interview with RE's Ross Ashcroft

ETA
Just watched the four horsemen - recommended - explains how the money juggling twats have had us over.
Trailer here:

 

[Dr Jon]

I knew we had a problem with money-juggling parasites, but I hadn't quite realised just how MUCH of a problem until I spotted this:

In 1975, 70% of those (foreign exchange) transactions were done to facilitate trade.
...
Now, just 3% is done for foreign trade; 97% is done for gambling - to make money by hoping to buy low and sell high - and the volume on the international foreign exchange markets is huge: 14 times the total annual global GDP.

from ~ 10:55 here:


When you consider the parasitic burden that the real economy is supporting, it's easy to understand why everything's turned to shit.

 

[ferrelhadley]

http://www.telegraph.co.uk/finance/...rket-rout-threatens-wider-global-economy.html

India has been taking a fair old wack the past few weeks. Now it seems the US slowing its QE program is sending a cold chill across the emerging world.

 

[yield]

Reuters. Thu Aug 22, 2013

Trading in thousands of U.S. stocks ground to a halt for much of Thursday after an unexplained technological problem shut down trading in Nasdaq securities, the latest prominent disruption to the operations of U.S. markets.

Nasdaq resumed trading at around 3:25 p.m. EDT (1925 GMT), after a 3-hour, 11-minute shutdown of trading in such familiar names as Apple Inc, Facebook Inc, Google Inc, Microsoft Corp and about 3,200 other companies.

The shutdown was the longest in recent memory, and prompted U.S. Securities and Exchange Commission Chair Mary Jo White to call for a meeting of Wall Street leaders to help insure the "continuous and orderly" functioning of securities markets.

"Any brokerage firm gets paid by executing orders," said Sal Arnuk, co-head of equity trading at Themis Trading in Chatham, New Jersey. "So yes, we are frustrated, and this hurts us, it hurts the market and it hurts public confidence."

Late on Thursday, Nasdaq's parent Nasdaq OMX Group Inc said it halted trading after learning that the Securities Information Processor, or SIP, which consolidates stock prices, was not disseminating price quotations.

"As we continue to eliminate human beings from the execution of security trading," said Stephen Massocca, managing director of Wedbush Equity Management LLC in San Francisco, "these events are going to take place, given the level of automation."

The outage was the latest black eye for Nasdaq, which in May agreed to pay $10 million, the largest penalty ever against a stock exchange, to settle SEC civil charges over its mishandling of Facebook's initial public offering.

Thursday's outage was the latest high-profile glitch in U.S. stock markets.

On Tuesday, a technical problem at Goldman Sachs Group Inc resulted in a flood of erroneous orders in U.S. equity options markets.

Two weeks earlier, on August 6, stock exchange operator BATS Global Markets faced a nearly hour-long outage.

Meanwhile, a 2012 trading blowup at Knight Capital Group Inc was a contributing factor to the eventual sale of that company.

Other trading venues were also affected by Thursday's outage. Several "dark pools," which execute orders anonymously, were forced to stop trading, several market participants said.

Thursday's outage could cause further problems for Nasdaq at the SEC, which has cracked down on stock exchanges to beef up their compliance with regulations and police themselves better.

White, who joined the regulator in April, is a Nasdaq veteran, having served on its board as recently as 2006.

Two months after White joined the SEC, the Chicago Board Options Exchange was ordered to pay $6 million to settle SEC charges that it failed to properly enforce short sale rules.

Meanwhile, the NYSE last year became the first exchange in SEC history to face a financial penalty after it supposedly gave some customers an "improper head start" on trading information.

As said in another piece it is like the flash crash in 2010.

I wonder how this'll affect the animal spirits?

Three hours is ages considering trades are made in fractions of a second.

 

[Dr Jon]

http://www.telegraph.co.uk/finance/...rket-rout-threatens-wider-global-economy.html

India has been taking a fair old wack the past few weeks. Now it seems the US slowing its QE program is sending a cold chill across the emerging world.

Yeah.
I spotted India on the verge of financial collapse the other day and see that it's just over Rs.100 to the £ now, up from around Rs.80 earlier this year.
It has averaged around Rs.85 for the past decade or so.
link

 

[Barking_Mad]

When a little birdie dropped the End Game memo through my window, its content was so explosive, so sick and plain evil, I just couldn't believe it.
The Memo confirmed every conspiracy freak’s fantasy: that in the late 1990s, the top US Treasury officials secretly conspired with a small cabal of banker big-shots to rip apart financial regulation across the planet. When you see 26.3 percent unemployment in Spain, desperation and hunger inGreece, riots in Indonesia and Detroit in bankruptcy, go back to this End Game memo, the genesis of the blood and tears.
The Treasury official playing the bankers’ secret End Game was Larry Summers. Today, Summers is Barack Obama’s leading choice for Chairman of the US Federal Reserve, the world’s central bank. If the confidential memo is authentic, then Summers shouldn’t be serving on the Fed, he should be serving hard time in some dungeon reserved for the criminally insane of the finance world.
The memo is authentic.

http://www.vice.com/en_uk/read/larry-summers-and-the-secret-end-game-memo

 

[Dr Jon]

From here

 

[yield]

Deutsche Bank has been told to rehire four traders who were unlawfully fired as part of the lender’s investigation into the manpulation of interest rates.
Telegraph. 11 Sep 2013

Germany’s largest bank had sacked the men, including a managing director and a vice-president of its Global Markets arm, in February for “inappropriate communication” with derivatives traders over the calculation of Libor and Euribor.

Following their dismissals, the traders - Ardalan G, Kai-Uwe K, Markus K, and Joerg V, whose full names have not been made public for legal reasons - sued the lender, saying that they were not aware of a ban prohibiting them from talking to other trading desks about inter-bank lending matters.

However, a judge at Frankfurt Labour Court on Wednesday ruled that “the termination was out of proportion”.

Judge Annika Gey added that Deutsche did not have “adequate internal rules and controls in place and did not ensure that rate submitting and derivatives trading was adequately separated”.

Deutsche said it would examine the ruling before deciding whether to appeal.

So the management was at fault rather than the employees?

 

[gosub]

Deutsche Bank has been told to rehire four traders who were unlawfully fired as part of the lender’s investigation into the manpulation of interest rates.
Telegraph. 11 Sep 2013


So the management was at fault rather than the employees?

I would have thought that the managing director and a vice president would count as management.

Looks like they are blaming compliance, presumably they have an email where they outlined what they were going to do that compliance didn't point out was wrong.

 

[newharper]

I would have thought that the managing director and a vice president would count as management.

Looks like they are blaming compliance, presumably they have an email where they outlined what they were going to do that compliance didn't point out was wrong.

That's a complete " dog eat my homework" If they couldn't even be bothered to fire off a covering letter to compliance at 4 a.m. one morning then their management was totally par for the course.

 

[Dr Jon]

Just seen that the full Four Horsemen film is now on YouTube:

 

[ayatollah]

Just seen that the full Four Horsemen film is now on YouTube:

I'd heard a lot of good things about this supposedly "radical" film. But I've just watched it. For a film that claims it is aiming to tear away the ideological veil preventing all of us seeing the true causes of the world economic crisis, poverty, political corruption, etc , etc, this film contains as much heavily ideological doublethink and bullshit as the neoliberal consensus "narrative" it sets out to debunk !

It is a most peculiar film; making lots of insightful observations about the growth of the disruptive, parasitic, finance capital sector, the corruption of the political establishments and regulatory institutions of the major world economies (but mostly the USA), the resource depletion problem, "terrorism" produced by the poverty caused by the current debt fuelled financial system, etc. etc. However the entire debate and ideological conflict is entirely described as one between the proponents of neoliberal (neo classical) capitalist economics, and "classical" economics ! And NO, Marx isn't mentioned at all ! Any alternative to capitalism itself is simply dismissed out of hand ! The film's assumed "good guys" are seeking a route out of the current capitalist crisis based entirely on the ludicrous premise that today capitalism just "isn't working properly". The "solutions" include that good old favourite - a return to the Gold Standard , yep if we can get rid of "fiat money", and return to the US Founding Father's intention to avoid personal income tax and production taxes - and return to Classical economists, Ricardo and Smith's ideas on taxing only landlord monopoly "rent" profits, etc, a new era of "REAL" free enterprise capitalism can take off on a new wave of growth and prosperity !

What a crock of shit ! It's a promotional film for a group of "funny money" Gold Standard enthusiasts and sentimental pro capitalist producer and anti financier, lets get back to the (mythical) golden era of self reliant capitalist independent producers ideologues. (the Left version of this is those neo Stalinist romantics who still wail "but we haven't really tried REAL LENINISM yet " )To see the film you'd sometimes believe that everything was basically hunky dory (at least in the US of A) until about 30 years ago and the start of the neoliberal (neo classical) economic model of deregulated capitalism !

At the start of the film there is a lot of completely delusional "End of (the US) Imperial hegemony" stuff - with laughably duff parallels with the decline of Rome ! This may seem hard (for a non US audience) to connect to the rest of the argument . But it is actually all part of the myopic, sentimental, "there was and can be a good , progressive, touchy-feely, progressive capitalism - just like the USA in its world hegemonic heyday after 1945 " (Do NOT mention the Jim Crow segregation Laws oppression of the Black Americans in the Golden Age , etc, etc, etc. No not listening ... fingers in ears.... it WAS a Golden Age !) ideological delusions of the almost entirely pro-capitalist (or pro "market economy") people providing this entirely bogus "narrative" throughout the film. Chomsky and a few others are a bit harder to fit in - but their comments are safely restricted to the periphery of the film's main "there can be a healthy, progressive version of capitalism which can save the world" argument.

This film is actually , overall, completely diversionery, red-herring laden, reactionary shit. No more tearing away the real ideological misrepresentation of the capitalist mass media about how the world really works ,that stops the working people of the world from seeing the source of their oppression ( capitalism of course ), than the superficially accurate partial insights of fascism about the parasitic role of finance capital within the capitalist system as a whole, provides a useful "route map" forward - once bundled up with all that divisive anti semitic and hyper nationalistic/racial superiority, "nation before class" collaboration , shit.

View this film with your "ideological bullshit" filters set to "Very high".

 

[Dr Jon]

I thought that film might rattle some cages.

I like their ideas about moving away from fiat money and a shift to worker-owned businesses.
I don't think abandoning fiat money necessarily implies a move to Gold: LETS (or a combination of both) would likely work just as well.

I don't reckon that the commentators really appreciate the constraints imposed by ecosystem collapse, resource depletion and climate change.

Also see:
http://steadystate.org/
The town printing its own currency

 

[yield]

Fed’s communications credibility takes a knock
FT. September 18, 2013

Communicating clear policy intentions to investors and mitigating market volatility has been the guiding philosophy of the Federal Reserve under Ben Bernanke.

That suddenly changed on Wednesday, when against all indications, the Federal Open Market Committee said it was in no hurry to start reducing its hefty $85bn buying of bonds each month.

The sudden dashing of carefully managed expectations by the FOMC means investors face a harder time trying to prepare for changes in policy intentions, which only fuels higher market volatility, market participants said.

Ultimately, the FOMC’s delay of the taper on Wednesday stands to make it far harder for the central bank to withdraw smoothly from its quantitative easing policy as its credibility on guiding policy intentions has lost some sheen.

So QE infinity is still on? Taper tomorrow?

I thought the Bank of International Settlements said some months back that the longer they delay the more the pain?

Edit: found it. I got it the wrong way round.
BIS fears fresh bank crisis from global bond spike
Telegraph. 23 Jun 2013

The Swiss-based institution said losses on US Treasury securities alone will reach $1 trillion if average yields rise by 300 basis points, with even greater damage in a string of other countries. The loss could range from 15pc to 35pc of GDP in France, Italy, Japan, and the UK. “Such a big upward move can happen relatively fast,” said the BIS in its annual report, citing the 1994 bond crash.

“Someone must ultimately hold the interest rate risk. As foreign and domestic banks would be among those experiencing the losses, interest rate increases pose risks to the stability of the financial system if not executed with great care.”

The warning comes after US Federal Reserve set off the most dramatic spike in US borrowing costs for over a decade last week with talk of early exit from quantitative easing (QE), sending tremors through the global system.

 

[yield]

Switzerland probes banks over possible forex rigging
Reuters Fri Oct 4, 2013

Switzerland's financial markets regulator is working with authorities in other countries to investigate possible manipulation in the $5 trillion-a-day foreign exchange market potentially involving multiple banks.

While hundreds of banks participate in the foreign exchange market, four players dominate, with a combined share of more than 50 percent, according to a May survey by Euromoney Institutional Investor. Germany's Deutsche Bank is No. 1, with a 15 percent share, followed by Citigroup with 14.9 percent, Britain's Barclays with 10 percent and UBS with 10 percent.

No surprises. Casino capitalism, the house always wins.

 

[yield]

RBS handed FX trader messages to UK regulator
Reuters Oct 9, 2013

Royal Bank of Scotland (RBS) has handed instant messages sent by a former currency trader to counterparts at other banks to Britain's financial regulator as part of its probe into the foreign exchange market, a source familiar with the matter said.

Investigations into the $5 trillion-a-day market have broadened with authorities in Switzerland and Britain looking into whether traders at banks sought to manipulate benchmark foreign currency rates.

RBS sent on the instant messages to Britain's Financial Conduct Authority (FCA) after deciding they were inappropriate. The action was taken following an internal probe, the source said on Wednesday, and the trader had left the bank before the messages were uncovered. His departure was not linked to the probe, according to the source.

No sure how big this'll be? More fines pre-privatisation?

 

[laptop]

RBS handed FX trader messages to UK regulator
Reuters Oct 9, 2013

No sure how big this'll be? More fines pre-privatisation?

The LIBOR-rigging investigation is just getting up steam, I think.

This forex-rigging thing has barely got the firelighters smouldering...

 

[littlebabyjesus]

I thought that film might rattle some cages.

I like their ideas about moving away from fiat money and a shift to worker-owned businesses.
I don't think abandoning fiat money necessarily implies a move to Gold: LETS (or a combination of both) would likely work just as well.

What's wrong with fiat money?

 

[Dr Jon]

What's wrong with fiat money?

Watch the film and find out.

 

[littlebabyjesus]

Watch the film and find out.

You give me a short summary of the idea. 50 words tops should do it. Or 20 ideally.

 

[Dr Jon]

You give me a short summary of the idea. 50 words tops should do it. Or 20 ideally.

oh fuck off then

 

[littlebabyjesus]

oh fuck off then

No, you give an answer. You always do this - just link to stuff, often crap stuff, and go 'there'. The last thing you linked to on here that I did read was absolute drivel. And I pointed out to you exactly how it was drivel. How about you reciprocate?

 

[Crispy]

oh fuck off then

It's not an unreasonable request. IMO, if you can't precis your argument in a few simple sentences then you don't really understand it or believe in it.

 

[Bernie Gunther]

For what it's worth, there is zero chance of me watching anything like that without a compelling case for doing so being made using the written word.

I would imagine that at least some other people feel the same way.