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Our Financial Future: Infinite Greed Meets a Funny Thing Called Karma
Our Financial Future: Infinite Greed Meets a Funny Thing Called Karma
All those angered by the mere question of the viability of this predatory pillaging in the name of capitalism are incapable of even admitting this cultural crisis exists.
Somewhere along the line, we lost the ability to distinguish between earning a profit and maximizing private gain by any means, i.e. Infinite Greed. If you insist on making this distinction now, you anger a lot of people, as it blows the capitalist cover of Infinite Greed.
If you make the distinction between earning a profit and maximizing private gain by any means, then you realize the status quo is neither sustainable nor good: it is unsustainable and evil. This angers everyone who has rationalized their investment in (and defense of) an evil system, because, well, it’s hard to feel all warm and fuzzy about your choices if the phony facade falls and the evil of the system you’ve defended is starkly revealed.The distinction between earning a profit and maximizing private gain by any means angers not just the few benefiting from the useful delusion that Infinite Greed is simply profit on overdrive; it seems to anger everyone who believes the Status Quo of burning mountains of coal to power towel warmers, sitting in traffic burning petrol two hours a day and central banks enriching the already wealthy is not just sustainable but gol-darned good.
Every enterprise must earn a profit to survive. A worker-owned collective must earn a profit, as it needs money to reinvest in the business and reward those who have invested their capital (human, social, financial, intellectual, etc.) in the enterprise.
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“Bad Bank” Mania Spreads in Europe
“Bad Bank” Mania Spreads in Europe
One thing that the world is not in short supply of these days is bad banks. They are everywhere, it seems. But there are bad banks, and there are Bad Banks. This article is about the latter, the officially dubbed “Bad Banks” launched by governments and central banks to conceal the rising tide of triple-F toxic junk (derivatives, securitized debt, non-performing loans…) that threatens to engulf the world’s financial system.
As Bad Banks go, few are as bad as Spain’s SAREB, the public-private company responsible for managing assets transferred from the four nationalized financial institutions BFA-Bankia, Catalunya Banc, NGC Banco-Banco Gallego, and Banco de Valencia.
In theory, SAREB was never meant to exist: “There will be no Bad Bank in Spain, and we will establish procedures that will not be burdensome for taxpayers.” Those were the famous words of Spanish PM Mariano Rajoy during the first few months of 2012. The promise was made on numerous occasions, and not just by Rajoy but also by his Minister of Economy (and former Lehman advisor) Luis de Guindos.
But in politics, promises are not made to last; they are there to be broken. By December of that same year, Sareb was born and Spanish taxpayers were left holding the tab for the biggest bank bailout in Spanish history.
Fast forward to today. Sareb is hemorrhaging. In 2014 the firm’s total losses were €585 million, more than double the amount registered in 2013, its first full year of operations (€260.53 million). It’s a stark contrast from the rosy picture painted by KPMG, the firm hired by the government to draw up Sareb’s original business plan. According to KPMG, investor returns, based on “conservative estimates,” would be in the order of around 15%!
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Market Turmoil Will Test the Post-Crisis Financial System – NYTimes.com
Market Turmoil Will Test the Post-Crisis Financial System – NYTimes.com.
Washington has been trying to bolster the financial system for the last five years so it can deal with mayhem in the markets. The turmoil this week will test those rebuilding efforts.
Investors, after months of piling into risky markets in search of returns, are now stampeding out.
In recent weeks, they have dumped junk bonds issued by American companies, particularly energy companies that have borrowed heavily to exploit the shale oil boom. A steep slide in the price of oil could now cause some of the companies to default, analysts say.
The most dangerous pain, however, is occurring abroad. Russia has a full-blown currency crisis, caused partly by the oil price decline. And oil’s move has fed fears about other countries. Turkey’s currency reached a record low on Tuesday, and Brazil’s currency has weakened sharply in recent days. Venezuela’s government bonds have plunged to levels that indicate that investors think a default is probable.
Why the Financial and Political System Failed and Stability Matters – Thoughts – Nomi Prins
Why the Financial and Political System Failed and Stability Matters – Thoughts – Nomi Prins.
The recent spike in global political-financial volatility that was temporarily soothed by ECB covered bond buying reveals another crack in the six-year-old throw-money-at-the-banks strategies of politicians and central bankers. The premise of using banks as credit portals to transport public funds from the government to citizens is as inefficient as it is not happening. The power elite may exude belabored moans about slow growth and rising inequality in speeches and press releases, but they continue to find ways to provide liquidity, sustenance and comfort to financial institutions, not to populations.
The very fact – that without excessive artificial stimulation or the promise of it – more hell breaks loose – is one that government heads neither admit, nor appear to discuss. But the truth is that the global financial system has already failed. Big banks have been propped up, and their capital bases rejuvenated, by various means of external intervention, not their own business models.
Last week, the Federal Reserve released its latest 2015 stress test scenarios. They don’t even exceed the parameters of what actually took place during the 2008-2009-crisis period. This makes them, though statistically viable, completely irrelevant in an inevitable full-scale meltdown of greater magnitude. This Sunday, the ECB announced that 25 banks failed their tests, none of which were the biggest banks (that received the most help). These tests are the equivalent of SAT exams for which students provide the questions and answers, and a few get thrown under the bus for cheating to make it all look legit.
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Quantitative Easing is like “treating cancer with Aspirin”
Quantitative Easing is like “treating cancer with Aspirin”.
Shortly before leaving the Fed this year, Ben Bernanke rather pompously declared that Quantitative Easing “works in practice, but it doesn’t work in theory.”
There is, of course, no counter-factual.
We’ll never know what might have happened if the world’s central banks had not thrown trillions of dollars at the banking system, and instead let the free market work its magic on an overleveraged financial system.
But to suggest credibly that QE has worked, we first have to agree on a definition of what “work” means, and on what problem QE was meant to solve.
If the objective of QE was to drive down longer term interest rates, given that short term rates were already at zero, then we would have to concede that in this somewhat narrow context, QE has “worked”.
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