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The G-30 Group Of Central Bankers Warn They Can “No Longer Save The World”
The G-30 Group Of Central Bankers Warn They Can “No Longer Save The World”
In a detailed report by the Group of Thirty, central bankers warned that ZIRP and money printing were not sufficient to revive economic growth and risked becoming semi-permanent measures. As Reuters reports, the flow of easy money has inflated asset prices like stocks and housing in many countries but have failed to stimulate economic growth; and with growth estimates trending lower and easy money increasing company leverage, the specter of a debt trap is now haunting advanced economies. “Central banks have described their actions as ‘buying time’ for governments to finally resolve the crisis… But time is wearing on,” sending a message of “you’re on your own” to governments around the world.
The G30 begins their report rather pointedly…
Central banks worked alongside governments to address the unfolding crises during 2007–09, and their actions were a necessary and appropriate crisis management response. But central bank policies alone should not be expected to deliver sustainable economic growth. Such policies must be complemented by other policy measures implemented by governments.At present, much remains to be done by governments, parliaments, public authorities, and the private sector to tackle policy, economic, and structural weaknesses that originate outside the control or influence of central banks. In order to contribute to sustainable economic growth, the report presumes that all other actors fulfill their responsibilities.
Roughly translated… central bankers are saying “you are now on your own.”
Central banks alone cannot be relied upon to deliver all the policies necessary to achieve macroeconomic goals. Governments must also act and use the policy-making space provided by conventional and unconventional monetary policy measures. Failure to do so would be a serious error and would risk setting the stage for further economic disturbances and imbalances in the future.
And the “need to exit” appears to be front and center for The G30 bankers…
…click on the above link to read the rest of the article…
Hillary, Bernie, and the Banks
Hillary, Bernie, and the Banks
Giant Wall Street banks continue to threaten the wellbeing of millions of Americans, but what to do?
Bernie Sanders says break them up and resurrect the Glass-Steagall Act that once separated investment from commercial banking.
Hillary Clinton says charge them a bit more and oversee them more carefully.
Most Republicans say don’t worry.
Clearly, there’s reason to worry. Back in 2000, before they almost ruined the economy and had to be bailed out, the five biggest banks on Wall Street held 25 percent of the nation’s banking assets. Now they hold more than 45 percent.
Their huge size fuels further growth because they’ll be bailed out if they get into trouble again.
This hidden federal guarantee against failure is estimated be worth over $80 billion a year to the big banks. In effect, it’s a subsidy from the rest of us to the bankers.
And they’ll almost certainly get into trouble again if nothing dramatic is done to stop them. Consider their behavior since they were bailed out.
In 2012 JPMorgan Chase, the largest bank on Street, lost $6.2 billion betting on credit default swaps tied to corporate debt – and then publicly lied about the losses. It later came out that the bank paid illegal bribes to get the business in the first place.
Last May the Justice Department announced a settlement of the biggest criminal price-fixing conspiracy in modern history, in which the biggest banks manipulated the $5.3 trillion-a-day currency market in a “brazen display of collusion,” according toAttorney General Loretta Lynch.
Wall Street is on the road to another crisis.
This would take a huge toll. Although the banks have repaid the billions we lent them in 2008, many Americans are still living with the collateral damage from what occurred – lost jobs, savings, and homes.
But rather than prevent this by breaking up the big banks and resurrecting Glass-Steagall, Hillary Clinton is taking a more cautious approach.
…click on the above link to read the rest of the article…
Chapter 5: Economists and the Banking System, Part 2: Adam Smith, Some Early Americans, and Friedrich List
Chapter 5: Economists and the Banking System, Part 2: Adam Smith, Some Early Americans, and Friedrich List
This chapter is about economics in transition. Economics means literally ‘housekeeping’ and most early writers on economics (roughly speaking before Adam Smith, 1723-90) treated it that way. They worried about a nation’s solvency, whether fairness generally prevailed in economic dealings, and whether the vulnerable were sufficiently protected against the powerful. By the end of this chapter, however, nationalist economics is promoting a ‘war of extermination’ between nations; and ‘institutions of credit’ – i.e. banks – have become economic weapons in the hands of national elites, for use both at home and abroad.
Economists before Adam Smith noticed that huge quantities of credit, based on very few assets, were passing as money, enabling real property to be purchased by people who had done nothing to gain it besides speculate or fund the speculations of others.[i] The ‘financial revolution’ was inevitably accompanied by a social revolution: the old landed gentry were being bought out and displaced by speculators in finance.[ii] Some economists were concerned about the effects on society generally, of such people gaining political and financial power.[iii] ‘Every little scoundrel gets a new estate’ commented Charles Davenant in 1701.
In 1707, there occurred one of those momentous turning-points in history which no one much remarks on. The nature of the event probably explains why it is so obscure: debt became a legally-recognised commodity. Not exactly a bit of history to thrill the imagination, and yet it changed the world, transforming how money could be made and leading by slow process to the situation today, when financial operators own most of the world’s wealth.
– See more at: http://www.cobdencentre.org/2015/10/chapter-5-economists-and-the-banking-system-part-2-adam-smith-some-early-americans-and-friedrich-list/#sthash.zN59Wvw7.dpuf
Commodity Carnage Continues Amid Fears Of Glencore Liquidation
Commodity Carnage Continues Amid Fears Of Glencore Liquidation
Despite a relatively unchanged US Dollar, commodities across the board are under significant (and seemingly coordinated) pressure this morning. It appears that the key selling began as Europe opened and the carnage in massive commodity group Glencore began to materialize. Glencore CDS is now above 700bps (up 154bps today) and stocks down almost 30% today…
Commodities being sold systemically despite a lack of FX-driven impact…
And even more worrying, Bank counterparty risk is re-soaring…
Charts: Bloomberg
Will The Fed Pick A Winning Combination?
Will The Fed Pick A Winning Combination?
It’s highly amusing to read all the ‘expert’ theories on a Federal Reserve hike or no hike tomorrow, but it’s also obvious that nobody really has a clue, and still feel they should be heard. Don’t know if that’s so smart, but I guess in that world being consistently wrong is not that big a deal.
Thing is, US economic numbers are so ‘massaged’ and unreliable, the Fed can pick whichever way the wind blows to argue whatever decision it makes. As long as jobs numbers get presented for instance without counting the 90-odd million Americans who are not in the labor force, and a majority of new jobs are waiters, just about anything goes in that area. Numbers on wages are just as silly.
And people can make inflation a big issue, but hardly anyone even knows what inflation is. Wonder if the Fed does. It had better, because if you don’t look at spending, prices don’t tell you a thing. They surely must look at velocity of money charts from time to time?!
The biggest thing for the Fed might, and perhaps must, be the confidence factor. It’s been talking about rate hikes for so long now that if it decides to leave rates alone, it will only create more uncertainty down the road. Uncertainty about the economy (no hike would suggest a weak economy), and also about its own capabilities.
If all you have is talk, people tend to take you a lot less serious. Moreover, the abject -and grossly expensive- failure of the Chinese central bank to quiet down its domestic stock markets has raised questions about the omnipotence of all central banks.
This morning’s spectacle of a 5% rise in Shanghai in under an hour near the close no longer serves to restore confidence, it further undermines it. Beijing doesn’t seem to get that yet. But the Fed might.
…click on the above link to read the rest of the article…
Fourth Turning: Crisis of Trust–Part 2
Fourth Turning: Crisis of Trust–Part 2
In Part 1 of this article I discussed the catalyst spark which ignited this Fourth Turning and the seemingly delayed regeneracy. In Part 2 I will ponder possible Grey Champion prophet generation leaders who could arise during the regeneracy.
The nearly seven year reign of Barack Obama has resulted in furthering wealth inequality, in spite of his socialistic rhetoric. Notwithstanding his Nobel Peace Prize, military spending is at all-time highs and we are engaged in actual and proxy wars across the Middle East and in the Ukraine. Race relations have never been worse. Poverty levels have never been worse. Real median household income is lower than it was in 1989. Real hourly wages are at 50 year lows. Home ownership has plunged to 50 year lows, as middle class workers have been kicked out of their homes and young people are saddled with so much student loan debt and bleak job opportunities they will never have an opportunity to own. The ownership society pushed by Clinton and Bush, with the proliferation of Wall Street created “exotic” subprime mortgages, peddled to people incapable of paying their mortgages, blew up the world in 2008, and the fall out will last for decades.
Meanwhile, Wall Street banks have reaped $700 billion of ill-gotten profits since 2010 as the Federal Reserve has handed them trillions of interest free funds to gamble with, while rigging the financial markets, and paying their executives obscene bonuses. The hubris and arrogance of the Wall Street titans is appalling, as they buy politicians, write toothless financial regulations (Dodd Frank) for their bought off politicians to pass, report fraudulent financial results with the stamp of approval from the FASB, blatantly rig interest rate, currency, stock and commodities markets, and use deception and propaganda to distract and mislead the public through their corporate media mouthpieces – dependent upon Wall Street advertising revenue to thrive.
…click on the above link to read the rest of the article…
Europe’s Banks – Insolvent Zombies
Europe’s Banks – Insolvent Zombies
The Walking Dead
Now that Europe’s fractionally reserved banking system has been regulated into complete inertia, it is a good time to assess the current bottom line, so to speak. We should mention here that there are essentially two ways of dealing with the banking system. One is to introduce an unhampered free market banking system based on strong property rights and nothing else. Such a system would work best if it were based on sound money, i.e., a market-chosen medium of exchange. The regulations governing such a system would fit on a napkin.
Image credit: Warner Bros, processing fmh
The Euro-Stoxx bank index, weekly, over the past 10 years. Recently the index has been unable to overcome resistance in the 160-162 area. The bust and the reaction of the authorities to the bust has made zombies out of Europe’s big banks – click to enlarge.
The other way is to construct what we have now: a banking cartel administered and backstopped by a central bank, based on fiat money the supply of which can be expanded at will and involving continual violations of property rights. Fractional reserve banking represents a violation of property rights, because it is based on the assumption that two or more persons can have a legally valid claim on the same originally deposited sum of money (for an extensive backgrounder on this, see our series on FR banking – part 1, part 2 and part 3). This legal fiction is very convenient for the banks and the State, but it sooner or later renders the banking system inherently insolvent (a de facto, but not a de iure insolvency).
Given this system’s inherent insolvency, the regulations governing it obviously won’t fit on a napkin. Instead they fill several volumes the size of telephone directories and keep growing like weeds.
…click on the above link to read the rest of the article…
Beware of American econ professors!
Beware of American econ professors!
How Krugman, Sachs and Stiglitz led the Greeks astray.
In countless public utterances and interviews since his resignation, former finance minister Yanis Varoufakis has spoken of how he urged the prime minister to authorize the issue of a parallel currency, to declare that Athens would default on €3.5 billion in Greek government bonds owed to the ECB on July 20 and to seize control of the Bank of Greece. Such an aggressive move would have led inevitably to the introduction of a new currency.
The idea was to use the personal data of Greek taxpayers to secretly create parallel accounts that would facilitate payments in case of a major liquidity squeeze. These accounts would be denominated in euros, but if the need presented itself, they could be turned into the new drachma “at the drop of a hat.”
Varoufakis is not the only one to have harbored revolutionary plans.
“They have served Greece’s cause very poorly indeed.”
On July 14, a few days before he was dismissed from the cabinet for voting against measures mandated by the agreement reached between Tsipras and Greece’s creditors, Panayotis Lafazanis, the head of the Left Platform, the influential far-left faction within Syriza, suggested seizing the national mint and expropriating up to €22 billion in reserves (his figure).
Euro ministers give blessing to Greek bailout, wooing IMF on debt
Euro ministers give blessing to Greek bailout, wooing IMF on debt
Euro zone finance ministers have agreed to lend Greece up to 86 billion euros ($96 billion) after Greek lawmakers accepted their stiff conditions despite a revolt by supporters of leftist Prime Minister Alexis Tsipras.
Assuming approval by the German and other parliaments, 13 billion euros should be in Athens next Thursday to pay pressing bills and a further 10 billion will be set aside at the European Stability Mechanism, earmarked to bolster Greek banks’ capital.
In all, euro zone governments will lend 26 billion euros in a first tranche of the bailout before reviewing Greece’s compliance with their conditions in October.
One remaining uncertainty – aside from Tsipras’ ability to deliver sweeping budget cuts and privatizations opposed by many of his own party – is the role of the International Monetary Fund. After backing two previous bailouts, the IMF renewed its call for the Europeans to grant Athens debt relief – a bone of contention between the Eurogroup and the Washington-based Fund.
Managing Director Christine Lagarde told the Eurogroup by telephone that she could not commit until the IMF board reviewed the situation in the autumn. Officials said the Fund needed more assurances and detail on Greek reforms, notably to pensions, and steps to persuade it that Greece’s debt burden was sustainable.
But after deadlock since January that ravaged the already weak Greek economy and ended in a dramatic U-turn a month ago by the anti-austerity leftist government to avert Athens’ expulsion from the euro, there was a cautious sense of optimism among ministers gathered in a Brussels deep in summer holiday languor.
“After six months of very difficult negotiations with lots of ups and downs, we finally have an agreement,” Greek Finance Minister Euclid Tsakalotos told reporters on Friday. His appointment by Tsipras six weeks ago in place of his abrasive predecessor has been hailed by counterparts as a mark of a new Greek “realism”.
…click on the above link to read the rest of the article…
EU Aims to Lure Greek Deposits Back to Banks With Bail-in Shield
EU Aims to Lure Greek Deposits Back to Banks With Bail-in Shield
Euro-area finance ministers shielded Greek bank depositors from any losses resulting from the restructuring of the nation’s financial system, as part of Friday’s deal on an 86 billion-euro ($96 billion) bailout.
Senior bank bondholders will be in the crosshairs if Greek lenders tap into any of the financial stability funds set aside in the new bailout. Euro-area finance ministers agreed to a deal that would next week place 10 billion euros in Greece’s bank recapitalization fund, with another 15 billion euros available if needed.
“Bail-in of depositors will be explicitly excluded” from European Union rules to make private investors share the cost of fixing troubled banks, Eurogroup President and Dutch Finance Minister Jeroen Dijsselbloem told reporters after the six-hour meeting in Brussels.
“When so much money must be invested in banks, in the first place, banks must take part of the risks,” Dijsselbloem said.
Alpha Bank AE’s 400 million euros of 3.375 percent notes due 2017 traded at 70.5 cents on the euro Friday to yield 25.4 percent. Those securities are up from a low this year of 27.5 cents in July.
Firewall Fund
At the start of the new aid program, the bank funds will be placed in a designated account at the European Stability Mechanism, the currency bloc’s firewall fund. Bank supervisors can tap the money as required once Greece’s banks have gone through stress tests and an asset-quality review.
After Greece’s lenders are recapitalized, the subsequent bank holdings will be transferred to the nation’s planned privatization fund, which will then be able to sell off the stakes and use the proceeds to pay back bailout funds.
…click on the above link to read the rest of the article…
Greeks: How did we lose our way?
Greeks: How did we lose our way?
In the heart of Athens everyday Greeks show us how they face the hardship and constraints brought on by the crisis.
For five years Greece has been mired in economic crisis, haunted by the spectre of expulsion from the eurozone.
A Greek exit seemed closer than ever this summer until a last-minute deal with the creditors – the international Monetary Fund (IMF), the European Central Bank and other eurozone countries – kept Greece in, but at the cost of more painful austerity measures and a humiliating further loss in sovereignty.
The grim figures of Greece’s great depression are well-known: a 25 percent contraction in the economy; youth unemployment at over 50 percent.
But while almost all Greeks have stories of hardship and anxiety to tell, life does go on.
Al Jazeera’s Barnaby Phillips heads to the Athenian middle-class neighbourhood of Nea Smyrni to see how Greeks are getting by, and hear their hopes and fears for the future.
| The banks used to phone us. They’d say, ‘Take this money and have a lovely holiday!’ or ‘Take this money and buy the car of your dreams.’ The people who accepted this money made a big mistake. |
The bailout agreement impacts all Greeks, but pensioners and small business owners are particularly worried.
We meet 68-year-old pensioner Sandy Karaiskou who lives on her own. Sandy was an airhostess for Olympic Airways, the Greek national airlines that went bust in 2009.
She takes us on a tour of her neighbourhood to meet her local baker and pharmacist, and to a laiki, the weekly street market.
Baker Dimitris Papavassiliou struggles to keep his business afloat. He talks to us about how the crisis has changed his family and work life and what will happen to his employees. He tells us about how he thinks the past governments are responsible for the crisis.
“Previous governments didn’t take the measures that they should have taken and failed to enforce necessary reforms. And now it’s escalated into a mountain,” he says.
…click on the above link to read the rest of the article…
Why is it So Hard for the West to See Everything is Connected?
Why is it So Hard for the West to See Everything is Connected?
QUESTION: Marty, you have written many times how everything is connected and how in Asian culture that is the foundation of all understanding. Why is it so hard in the West to comprehend this fundamental concept?
All the best
GD
ANSWER: I think it is all part of the idea that we can alter society forcing it to do as we desire. Politics is based upon this. Socialism is all about robbing one class to benefit the other. There is no comprehension that everything is connected and this permeates analysis as well. This is not my personal discovery for many have seen these connections in Eastern Philosophies. I think in economics, politicians are not interested in such realizations for it means they are not the masters of the universe.
You take Obama’s policy against Russia. He has effectively been disrupting everything around Europe and the consequences are pouring in refugees to Europe and his sanctions have hurt European farmers and the economy. It is not deliberate, but it is reckless for there is no recognition of how everything is connected.
Every action has a consequence. We have the Fed lowered rates to help the banks. But that crisis is over and the consequence has been to create the next crisis – the defaults of pensions and insurance companies that required high interest rates. So many regulations required pension funds to own government bonds. The regulations have set the stage for the next crisis.
We cannot escape this connectivity. Whatever action we take has a consequence. It is impossible to manipulate markets and the economy for there will always be unintended collateral damage. We are living in the era that will bring about a collapse of socialism precisely as took place in communism. Government is incapable of ever managing society for they cannot escape the inter-connectivity.
