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Basel 3: A Revolution That Once Again No One Noticed

Basel 3: A Revolution That Once Again No One Noticed

By Aleksandr Khaldey
Translated by Ollie Richardson and Angelina Siard
cross posted with https://www.stalkerzone.org/basel-3-a-revolution-that-once-again-no-one-noticed/
source: http://www.iarex.ru/articles/65626.html

Real revolutions are taking place not on squares, but in the quiet of offices, and that’s why nobody noticed the world revolution that took place on March 29th 2019. Only a small wave passed across the periphery of the information field, and the momentum faded away because the situation was described in terms unclear to the masses.

No “Freedom, equality, brotherhood”, “Motherland or death”, or “Power to Councils, peace to the people, bread to the hungry, factories to the worker, and land to the farmers” – none of these masterpieces of world populism were used. And that’s why what happened was understood in Russia by only a few people. And they made such comments that the masses either did not fully listen to them or did not read up to the end. Or they did listen to the end, but didn’t understand anything.

But they should’ve, because the world changed so cardinally that it is indeed time for Nathan Rothschild, having crumpled a hat in his hand, to climb onto an armoured Rolls-Royce [a joke referencing what Lenin did – ed], and to shout from on top of it to all the Universe: “Comrades! The world revolution, the need for which revolutionaries spoke about for a long time, came true!” [paraphrasing what Lenin said – ed] And he would be completely right. It’s just that the results of the revolution will be implemented slowly, and that’s why they are imperceptible for the population. But the effects, nevertheless, will be soon seen by absolutely everyone, up to the last cook who even doesn’t seek to learn to govern the state soon.

 …click on the above link to read the rest of the article…

Chapter 6: American, Won and Lost

CHAPTER 6: AMERICA, WON AND LOST.

After the United States gained its independence from Britain, it became powerful in the world in two very different ways: as an idea, and as a reality.

‘America the idea’ is a land of freedom and democracy, equality and opportunity, promoting these aspirations and values across the world.

‘America the reality’ is an international power. It was built on genocide and slavery. Today, a carefully managed monetary system allots wealth to those who do no productive work. In the wider world, America destabilizes popular governments, promotes tyrannies, creates dollars to purchase foreign resources for corporate exploitation and sponsors foreign wars to establish new bases of military and financial power.

For a long time ‘American the idea’ successfully camouflaged the activities of ‘America the reality’. Today the camouflage is wearing very thin indeed.

‘America the reality’ became stronger than ‘America the idea’ as the powers of money and corporate industry won out over the idealism and the good intentions of many of its ‘founding fathers’[1] and of countless others. Central to this development was the adoption of British banking as a way of creating money.

The adoption of British banking by America has an interesting history. After Independence, the American elite opted for the method favoured by their old colonial masters and rejected homegrown approaches to money-creation, some of which had been both just and efficient (see below).

The new elite liked British banking for the same reason it was loved by the British parliament – because it favoured government power and private wealth. The collusion of finance and government power, via circulating credit, is a very resilient form of concentrated power, because although everyone can see the bad effects, few people understand how it works. Governments across the world have since adopted the method for the same reasons: to augment their own power, and to make it easy for their supporters to increase their own wealth.

 …click on the above link to read the rest of the article…

How Digital Banking Makes You More Vulnerable

A man takes part in a hacking contest during the Def Con hacker convention in Las Vegas, Nevada, U.S. on July 29, 2017. (Reuters/Steve Marcus)

A man takes part in a hacking contest during the Def Con hacker convention in Las Vegas, Nevada, U.S. on July 29, 2017. (Reuters/Steve Marcus)

How Digital Banking Makes You More Vulnerable

Banking – and bank robbery – have entered the digital age and all is not well.

Safes and vaults used to be how banks protected your money. Now the money completely accessible through your digital identity. But how safe is your digital identity?

Needless to say, banking has changed. Although managing financial assets, providing services and processing transactions remains retail financial institutions’ primary functions, they’re also charged with protecting the most prized and valuable assets of all: their customers’ digital identities. That would include yours as well as mine. They’re spending vast sums on it as well. Unfortunately, achieving total security is more of a challenge than paying interest on a CD or interest-bearing checking account.

Invasive Banking Laws Make You Vulnerable

One of the biggest changes in banking over the past decade or so is how much individual privacy has been eliminated. With various anti-money laundering laws and protocols put in place since the 9-11 Attacks, banks have been given new powers aimed at identifying sources of funds and recipients of financial transfers. Furthermore, strict limits on how you transfer or receive money – how much, how often, from whom or to and from where – have resulted in banks knowing more about their clients’ lives than ever before.

But that invasiveness has left clients’ identity incredibly vulnerable. In the past, some banks were slower in adopting client data security tools and protocols necessary to protect personal and corporate client identity details due to conflicting interests. And even those that did so couldn’t be certain that their efforts were successful. Even with the most sophisticated systems in place, that ambiguity remains today.

 …click on the above link to read the rest of the article…

Chapter 4: Early Days

CHAPTER 4: EARLY DAYS.

The situation we are in today has evolved over many centuries. Economists had plenty of time and opportunity to comment – and comment they did. Only recently has it become highly controversial to notice that banks create money, let alone to discuss the implications.[1] This makes the comments of earlier economists particularly interesting – for their honesty and perceptiveness.

This chapter begins with economists commenting on the increasing power and influence of bank-credit. It finishes with a fascinating (and very modern) suggestion from 1707 of how money shouldbe created, fairly and realistically for the benefit of all. The proposal is similar to many reform proposals being put forward today.

Here are some features of bank-money that writers on economics were reacting to (some unfavourably, some favourably):

  • Bankers create more in ‘credit’ than they have in ‘cash’.
  • Their credit becomes money when it circulates in making payments.
  • When bank-credit becomes money, interest siphons money from working and productive people to wealthy and powerful people.[2]
  • Money created by banks increases the powers of government and concentrates the power of capital in fewer and fewer hands.
  • Bank-credit feeds war, predatory nationalism and national debt.
  • Increased concentrations of power bring new moral values: neglecting justice in favour of social management, exploitation and direction from above.

For roughly two thousand years, from the days of Aristotle to the end of the Middle Ages, economists did not pretend to be ‘scientists’. First and foremost, they were moral philosophers. They wrote about money and power in relation to law and the morality of human well-being. Aristotle, for instance, believed that money should be a means of exchange, not allowed to ‘breed’ more money.[3] Money, he said, is a human invention. We must be careful that it produces good, not evil.

 …click on the above link to read the rest of the article…

Money: How Its Past Predicts Its Future

Money: How Its Past Predicts Its Future

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What is money, where does it come from and more importantly where does it go?

At first glance, it might appear inexplicable and bizarre that our governments and our rulers have managed to keep their stronghold over the monetary system for 2000 years, especially when one thinks about the countless ways in which they abused that power and used their monopoly to the detriment of their own citizens. It was a mass delusion that facilitated this, a blind belief that they, and they alone, can be trusted with this vital task while looking out for our best interests as well. However, now, as mistrust against our rulers is justifiably deepening, it is becoming increasingly clear that only we as individuals can ensure our best interests and it is only a matter of time before the entire ill-founded edifice comes crumbling down.

To answer all these questions about money, we need to first understand its history — keeping in mind that those who don’t know history are condemned to repeat it. Everything started when people settled down and instead of living off nature they started adding value to it; this was the beginning of private property rights. In addition, men started to realize that some people are better at performing specific duties than others and thus set into motion what we today understand as the division of labor. This increased economic output and in general terms, everyone became better off. This transition in how work was performed in an economy made trade between individuals a necessity. Thus barter, or the exchange of real goods and services against other real goods and services, became commonplace. Barter also had its disadvantages, because it required what is known as a “double coincidence of wants” in order to function.

…click on the above link to read the rest of the article…

Does China Have Enough Gold to Move Toward Hard Currency?

Does China Have Enough Gold to Move Toward Hard Currency?

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Are the Chinese Keynesian?

We can be reasonably certain that Chinese government officials approaching middle age have been heavily westernised through their education. Nowhere is this likely to matter more than in the fields of finance and economics. In these disciplines there is perhaps a division between them and the old guard, exemplified and fronted by President Xi. The grey-beards who guide the National Peoples Congress are aging, and the brightest and best of their successors understand economic analysis differently, having been tutored in Western universities.

It has not yet been a noticeable problem in the current, relatively stable economic and financial environment. Quiet evolution is rarely disruptive of the status quo, and so long as it reflects the changes in society generally, the machinery of government will chug on. But when (it is never “if”) the next global credit crisis develops, China’s ability to handle it could be badly compromised.

This article thinks through the next credit crisis from China’s point of view. Given early signals from the state of the credit cycle in America and from growing instability in global financial markets, the timing could be suddenly relevant. China must embrace sound money as her escape route from a disintegrating global fiat-money system, but to do so she will have to discard the neo-Keynesian economics of the West, which she has adopted as the mainspring of her own economic advancement.

With Western-educated economists imbedded in China’s administration, has China retained the collective nous to understand the flaws, limitations and dangers of the West’s fiat money system? Can she build on the benefits of the sound-money approach which led her to accumulate gold, and to encourage her citizens to do so as well?

…click on the above link to read the rest of the article…

Global Banking Stocks Are Crashing Hard – Just Like They Did In 2008

Global Banking Stocks Are Crashing Hard – Just Like They Did In 2008

Global stocks are falling precipitously once again, and banking stocks are leading the way.  If this reminds you of 2008, it should, because that is precisely what we witnessed back then.  Banking stocks collapsed as fear gripped the marketplace, and ultimately many large global banks had to be bailed out either directly or indirectly by their national governments as they failed one after another.  The health of the banking system is absolutely paramount, because the flow of money is our economic lifeblood.  When the flow of money tightens up during a credit crunch, the consequences can be rapid and dramatic just like we witnessed in 2008.

So let’s keep a very close eye on banking stocks.  Global systemically important bank stocks surged in the aftermath of Trump’s victory in 2016, but now they are absolutely plunging.  They are now down a whopping 27 percent from the peak, and that puts them solidly in bear market territory.

U.S. banking stocks are not officially in bear market territory yet, but they are getting close.  At this point, they are now down 17 percent from the peak…

Monday early afternoon, the US KBW Bank index, which tracks large US banks and serves as a benchmark for the banking sector, is down 2.5% at the moment. It has dropped 17% from its post-Financial Crisis high on January 29.

Of course European banking stocks are doing much worse.  Right now they are down 27 percent from the peak and 23 percent from a year ago.  The following comes from Wolf Richter

But unlike their American brethren, the European banks have remained stuck in the miserable Financial Crisis mire – a financial crisis that in Europe was followed by the Euro Debt Crisis. The Stoxx 600 bank index, which covers major European banks, including our hero Deutsche Bank, has plunged 27% since February 29, 2018, and is down 23% from a year ago

…click on the above link to read the rest of the article…

More Italians Move Savings To Switzerland As Fears Of Banking “Doom Loop” Intensify

With the euro weakening against the Swiss franc (recently trading at session lows of 1.14) and Italian stocks and bonds tumbling once again on reports that the European Commission is planning to reject the Italian draft budget plan submitted earlier this week – a repudiation of Italy’s populist leaders that was widely anticipated – the Telegraph’s Ambrose Evans-Pritchard offered a glimpse into how middle-class Italians are reacting to the deteriorating relationship between Italy and the EU, and its attendant impact on the country’s banks and capital markets. In a trend that’s eerily reminiscent of the banking run that precipitated the near-collapse of the Greek banking system (most recently in 2015), Italians are scrambling to convert their euros into Swiss francs and stash them across the country’s northern border with Switzerland.

Swiss

Right now, the movement has mostly been limited to the wealthy. “The big players” have already gotten out…

The Swiss group Albacore Wealth Management told Italy’s Il Sole had received a wave of inquiries from Italians with €5m to €10m in liquid capital. The super-rich are already a step ahead. “The big fish have been organizing the expatriation of their wealth for some time,” it said.

…and those with between 200,000 euros and 300,000 euros in assets are moving more quickly, inspired by memories of desperate Greeks struggling with capital controls that restricted ATM withdrawals.

“There is fear creeping in,” said Massimo Gionso, head of family wealth managers CFO Sim in Milan.

“People are concerned that if we get into the same situation as Greece, they might find the banks are closed and they can take out only €50 a day from cash machines. They don’t want to risk it,” he told the Daily Telegraph.

…click on the above link to read the rest of the article…

Why the Fed Denied the Narrow Bank

It’s not every day that a clear example showing the horrors of central planning comes along—the doublethink, the distortions, and the perverse incentives. It’s not every year that such an example occurs for monetary central planning. One came to the national attention this week.

A company called TNB applied for a Master Account with the Federal Reserve Bank of New York. Their application was denied. They have sued.

First, let’s consider TNB. It’s an acronym for The Narrow Bank. A so called narrow bank is a bank that does not engage in most of the activities of a regular bank. It simply takes in deposits and puts them in an account at the Fed. The Fed pays 1.95%, and a narrow bank would have low costs, so it could pass most of this to its depositors. This is pretty attractive, and without the real estate and commercial lending risks—not to mention derivatives exposure—it’s less risky than a regular bank. According to Bloomberg’s Matt Levine, saving accounts for large depositors average only 0.08% interest.

So it’s easy to see why many believe that the Fed’s reason to refuse an account to TNB is unsavory: to protecting the crony too-big-to-fail banks. That is a plausible explanation for sure, but there is much more.

The Bank: Spindled, Folded, and Mutilated

There has been a long, slow process—punctuated by big changes in responses to crises—of perverting the banks. Before the first world war, when a retailer received consumer goods he would sign a bill acknowledging delivery. Typically, he had 90 days to pay, which was enough time to sell the goods through to the consumer. The wholesaler could endorse this and pass it to his creditors. The bill traded at a discount to its face value.

…click on the above link to read the rest of the article…

John Law and the Mississippi Bubble – 300 Years Later

John Law and the Mississippi Bubble – 300 Years Later

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Most people are aware that historically there have been speculative bubbles. Some of them can even name a few – the South Sea bubble, tulips, and more recently dot-coms. Some historians can go even further, quoting the famous account by Charles Mackay of the South Sea bubble, the tulip mania and the Mississippi bubble, published in the mid-nineteenth century.

The most valuable bubble empirically for the purpose of our elucidation has to be the Mississippi bubble, whose central figure was John Law. Law, a Scotsman whose father’s profession was as a goldsmith and banker in Edinburgh, set up an inflation scheme in 1716 to rescue France’s finances. He proposed to the Regent for the infant Louis XIV a scheme that would be based on a new paper currency.

Law was a somewhat louche character, who in his Continental travels had spent his mornings studying finance and the principles of trade, and the evenings in the gaming-houses of Europe. He was a successful gambler, because of his ability to calculate odds.

Some similarities with the personality of Keynes two hundred years later are striking. Keynes was a mathematician first, and an economist second. Their approach was also similar: see a problem and try to find a solution, instead of seeing a problem and trying to understand why it existed before solving it. Both Law and Keynes felt that sound money was too restrictive for the enhancement of an economy.

Consequently, much of what Law proposed and then enacted in France rhymes with our neo-Keynesian world today. The difference, perhaps, is that when given the opportunity, Law seized it, and had ultimate financial and monetary power. He harnessed the roles of a central bank, monopolist in international trade, stock promoter and finance minister.

…click on the above link to read the rest of the article…

All Is Not Well In Financial Markets

All Is Not Well In Financial Markets

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It seems to be a hard time for those expressing concern about the build-up of risks in the economic and financial system: the major economies in the world are expanding at a decent clip, credit default concerns are very low, and stock and housing prices keep going up, driven by investor optimism and supported by an ongoing low interest rate environment.

Moreover, cyclical indicators do currently not suggest that something terrible is just around the corner. But of course, there is good reason not to get carried away by the “all is well” mentality that has gripped financial market action. For central banks have, by way of their monetary policies of exceptionally low interest rates, set into motion an artificial upswing (“boom”).

While the boom leads to higher output and employment levels, it also causes — beneath the surface, so to speak — malinvestment on a grand scale: the development of the economies’ production and employment structure is getting diverted from the path it would have taken had there not been a downward manipulation of interest rates on the part of central banks.

Some Theory

This becomes obvious once a sound theory of the interest rate is taken into account, as put forward by the Austrian School of Economics, in particular by Ludwig von Mises. To explain this in some detail, we have to make a distinction between the “pure,” or “originary,” interest rate and the “nominal market” interest rate.

The originary interest rate is inseparably tied to human action: each and one of us value an early satisfaction of a want more highly than a later satisfaction of the same want. In other words: we as human beings value a good that is presently available more highly than the same good available at a future point in time. This is the direct outcome of our time preference.

…click on the above link to read the rest of the article…

Deutsche Bank’s Troubles Raise Worries About the Future of the Euro Zone

The euro banking sector is huge: In April 2018, its total balance sheet amounted to 30.9 trillion euro, accounting for 268 per cent of gross domestic product (GDP) in the euro area. Unfortunately, however, many euro banks are in lousy shape. They suffer from low profitability and carry an estimated total bad loan exposure of around 759 billion euro, which accounts for roughly 30 per cent of their equity capital.

Share price developments suggest that investors have lost quite some confidence in the viability of euro banks’ businesses: While US bank stocks are up 24 per cent since the beginning of 2006, the index for euro-area bank stocks is still down by around 70 per cent. Perhaps most notably, ’Germany’s two largest banks, Deutsche Bank and Commerzbank, have lost 85 and 94 per cent, respectively, of their market capitalization.

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With a balance sheet of close to 1.5 trillion euro in March 2018, Deutsche Bank accounted for around 45 per cent of German GDP. In international comparison, this an enormous, downright frightening dimension. It is mostly the result of the bank still having an extensive (though not profitable) footprint in the international investment banking business. The bank has already started reducing its balance sheet, though.

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Beware of big banks — this is what we could learn from the latest financial and economic crises 2008/2009. Big banks have the potential to take an entire economy hostage: When they get into trouble, they can drag everything down with them, especially the innocent bystanders – taxpayers and, if and when the central banks decide to bail them out, those holding fiat money and fixed income securities denominated in fiat money.

Banking Risks

For this reason, it makes sense to remind ourselves of the fundamental risks of banking – namely liquidity riskand solvency risk –, for if and when these risks materialise, monetary policy-makers can be expected to resort to inflationary actions.

…click on the above link to read the rest of the article…

BIS Confirms Banks Use “Lehman-Style Trick” To Disguise Debt, Engage In “Window Dressing”

Several years ago we showed how the Fed’s then-new Reverse Repo operation had quickly transformed into nothing more than a quarter-end “window dressing” operation for major banks, seeking to make their balance sheets appear healthier and more stable for regulatory purposes.

As we described in article such as “What Just Happened In Today’s “Crazy” And Biggest Ever “Window-Dressing” Reverse Repo?”,Window Dressing On, Window Dressing Off… Amounting To $140 Billion In Two Days”, Month-End Window Dressing Sends Fed Reverse Repo Usage To $208 Billion: Second Highest Ever“, “WTF Chart Of The Day: “Holy $340 Billion In Quarter-End Window Dressing, Batman“, “Record $189 Billion Injected Into Market From “Window Dressing” Reverse Repo Unwind” and so on, we showed how banks were purposefully making their balance sheets appear better than they really with the aid of short-term Fed facilities for quarter-end regulatory purposes, a trick that gained prominence first nearly a decade ago with the infamous Lehman “Repo 105.”

And this is a snapshot of what the reverse-repo usage looked like back in late 2014:

Today, in its latest Annual Economic Report, some 4 years after our original allegations, the Bank for International Settlements has confirmed that banks may indeed be “disguising” their borrowings “in a way similar to that used by Lehman Brothers” as debt ratios fall within limits imposed by regulators just four times a year, thank to the use of repo arrangements.

For those unfamiliar, the BIS explains that window-dressing refers to the practice of adjusting balance sheets around regular reporting dates, such as year- or quarter-ends and notes that “window-dressing can reflect attempts to optimise a firm’s profit and loss for taxation purposes.”

…click on the above link to read the rest of the article…

The Dollar Dilemma: Where to From Here?

The Dollar Dilemma: Where to From Here?

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 Introduction: Where We Are 

It’s a fallacy to believe the US has a free market economy. The economy is run by a conglomerate of individuals and special interests, in and out of government, including the Deep State, which controls central economic planning.

Rigging the economy is required to prevent market forces from demanding a halt to the mistakes that planners continuously make. This deceptive policy can last only for a limited time. Ultimately, the market proves more powerful than government manipulation of economic events. The longer the process lasts, the greater the bubble that always bursts. The planners in charge have many tools to perpetuate confidence in an unstable system, but common sense should tell us that grave dangers lie ahead.

Their policies strive to convince the unknowing that the dollar is strong and its status as the world’s reserve currency is secure, no matter how many new dollars they create of out of thin air. It is claimed that our foreign debt is always someone else’s fault and never related to our own monetary and economic mismanagement.

Official government reports inevitably claim inflation is low and we must work harder to increase it, claiming price increases somehow mystically indicate economic growth.

The Consumer Price Index is the statistic manipulated to try to prove this point just as they use misleading GDP numbers to do the same. Many people now recognizing these reports are nothing more than propaganda. Anybody who pays the bills to maintain a household knows the truth about inflation.

Ever since the Great Depression, controlling the dollar price of gold and deciding who gets to hold gold was official policy. This advanced the Federal Reserve’s original goal of demonetizing precious metals, which was fully achieved in August 1971.

…click on the above link to read the rest of the article…

Next Mortgage Default Tsunami Isn’t Going to Drown Big Banks but “Shadow Banks”

Next Mortgage Default Tsunami Isn’t Going to Drown Big Banks but “Shadow Banks”

As banks pull back from mortgage lending amid inflated prices and rising rates, “shadow banks” become very aggressive.

In the first quarter 2018, banks and non-bank mortgage lenders – the “shadow banks” – originated 1.81 million loans for residential properties (1 to 4 units). In the diversified US mortgage industry, the top 10 banks and “shadow banks” alone originated 260,570 mortgages, or 14.4% of the total, amounting to $75 billion. We’ll get to those top 10 in a moment.

Banks are institutions that take deposits and use those deposits to fund part of their lending activities. They’re watched over by federal and state bank regulators, from the Fed on down. Since the Financial Crisis and the bailouts, they were forced to increase their capital cushions, which are now large.

Non-bank lenders do not take deposits, and thus have to fund their lending in other ways, including by borrowing from big banks and issuing bonds. They’re not regulated by bank regulators, and their capital cushions are minimal. During the last mortgage crisis, the non-bank mortgage lenders were the first to collapse – and none were bailed out.

So let’s see.

Of those 1.81 million mortgages originated in Q1 by all banks and non-banks, according to property data provider, ATTOM Data Solutions:

  • 666,000 were purchase mortgages, up 2% from a year ago
  • 800,000 were refinance mortgages (refis), down 11% from a year ago due to rising interest rates.
  • 348,000 were Home Equity Lines of Credit (HELOCs), up 14% from a year ago

HELOCs, which allow homeowners to use their perceived home equity as an ATM, are once again booming: $67 billion were taken out in Q1, though that’s still less than half of peak-HELOC in Q2 2006, when over $140 billion were taken out.

The Top 10 Mortgage Lenders in Q1 2018

…click on the above link to read the rest of the article…

Olduvai IV: Courage
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