Posts tagged banking system
Posts tagged banking system
This does not bode well for the global economic climate. When economies are stable interest is paid, not charged, on money loaned. Our times are out of whack and getting ever worse. European countries have elected to save the banks and the banking system and let the citizenry and investors go to hell. Unfortunately the system will still eventually fall apart one way or another.
Published on Jan 9, 2012 by Euronews
Germany is the latest country that investors are paying to lend it money.
As it sold 3.9 billion euros worth of short term government bonds, Berlin paid a negative return for the first time.
Investors are so worried about other countries defaulting and not repaying what they have borrowed that they are prepared to accept not getting any interest in return for their money being in a safe place.
The Federal Reserve Scam or How Our Currency System Doesn’t Work but Mortgages Our Future
Uploaded by CaseyResearchFAN on Oct 24, 2011
http://bit.ly/whenmoneydies Michael Maloney, CEO and Founder of goldsilver.com speaks at the Casey Research/Sprott Summit When Money Dies.
In this video excerpt from the Casey Summit When Money Dies, Rich Dad advisor Mike Maloney explains how currency is created, “fractional reserve banking,” and why our banking system is a pyramid scam of epic proportions.
The sold-out When Money Dies summit was a huge success, with attendees and participants alike receiving much to think about. If you missed it, you can still “be there,” via a full set of audio recordings. These are available now, in CD or MP3 format for your convenience. http://bit.ly/whenmoneydies
OCTOBER 17, 2011
BY KEITH FITZ-GERALD, ,The latest plan to preserve the European Union (EU) and save the global banking sector is to force European banks to increase their equity capital.
The goal, of course, is to restore confidence and stability. But if that’s the case, then why are so many analysts and savvy investors still nervous?
To put it bluntly, because they know it won’t work.
As it stands, the capital shortage is about 200 billion euros ($277 billion) according to the International Monetary Fund (IMF). I think it’s more like 1 trillion euros ($1.4 trillion) by the time you factor in all the cross holdings and the daisy chain of exposure that makes the entire banking system there look like Swiss cheese.
Why Recapitalization Won’t WorkThere are three things that are especially problematic to me:
As I have noted repeatedly since this crisis began, regulators are fighting the wrong battle and have been since 2008. They are worried about liquidity when they should be worried about solvency.
- European Union (EU) ministers apparently are going to put capital into the system without knowing how much it needs or exactly where to put it. Hard to believe, but thanks to the opaque nature of the derivatives markets, nobody can be sure exactly how much exposure any one bank or financial institution has.
- Healthy banks that do not need an infusion will get one anyway. Rainer Skierka, who is a stock analyst atBank Sarasin & Cie AG, shares my belief that this will lead to massive dilution for shareholders.
- Any bank that is undercapitalized will effectively be the recipient of capital that has been diverted away from healthy banks and into its toxic financials. Unfortunately, this money will be placed at higher risk in an effort to earn the incremental income needed to backstop bad bets that already are on the books. That means shareholders who are led to believe things are improving will actually find their money at an even higher risk than before.
Sure, a bank recapitalization can repair the banking system when it comes to keeping money moving in terms of short-term credit - but no amount of money can prepare European banks for a sovereign default or credit freeze becausethere literally isn’t enough money on the planet to recapitalize the banking system unless you remove the risks that plague it.
The “system” is still at incredible risk.
The total worldwide notional derivatives exposure is more than $600 trillion dollars according to the Bank for International Settlements (BIS). And that’s against a gross market value of merely $21.1 trillion.
In other words, banks have invested in instruments valued at $21 trillion but with a total exposure that’s 28.4-times that — or $600 trillion dollars.
This is why rogue traders are such a problem; they can take disproportionately large risks with not a lot of capital, which often leads to catastrophe.
Take Nick Leeson, the former derivatives broker who worked for Barings Bank. His leveraged trading losses eventually reached $1.4 billion, or twice Baring’s available trading capital. Barings went under as a result.
More recently, Kweku Adoboli, who served as director of exchange traded funds (ETFs) at UBS AG (NYSE: UBS), blew a $2 billion hole in UBS’ balance sheet.
Part of the problem is that n obody knows exactly how much cash banks spend to amass such investments because derivatives and sovereign debt trading instruments are still largely unregulated and “self policed” within the industry.
So what’s this have to do with our money?
by Graham Summers Posted Tuesday, 11 October 2011
Here is the reality of the financial system today:
§ The European banking system is facing systemic collapse.
§ The US economy has rolled over and is in a confirmed double dip in the context of a larger DE-pression.
§ The Central Banks and regulators have admitted we are peering into the abyss and they have no clue what to do.
Yes, I believe that before this mess ends, the financial system as a whole will have collapsed. What’s coming is going to make 2008 look like a joke.
If you have yet to prepare yourself for what’s coming, now is the time to do so. Whether it’s by moving to cash and bullion, opening some shorts, or simply getting out of the markets altogether, now is the time to be preparing for what’s coming (remember, stocks took six months to bottom after Lehman… and that was when the Fed still had some bullets left to combat the collapse).
And if you’re looking for specific ideas to profit from this mess, my Surviving a Crisis Four Times Worse Than 2008 report can show you how to turn the unfolding disaster into a time of gains and profits for any investor.
The US dollar has lost over 80 percent of its purchasing power compared to gold in the last decade alone. Gold, however, has endured as money for over 3,000 years, and maintained its purchasing power throughout that time, because it meets all of the criteria for money. To satisfy the functions of money, an item must be a unit of account, a medium of exchange and a store of value. Gold is all of these things; it is durable, portable, divisible, consistent, intrinsically valuable and, of crucial relevance today, it cannot be created by central banks.
Gold is a tangible asset, something that is real and in limited supply, as opposed to fiat currency, which is merely worthless paper that governments can produce at will. It is only the promise written on the paper enforced by a government decree that gives it any value. The more governments produce, the less value it has.
In light of this, it makes sense to earn currency and then protect its value through precious metals ownership of gold, silver and platinum.
The current monetary system, which, in its current form, began in 1971, has two critical features that have profound implications for our financial future:
- Fiat currency is created out of debt via the banking system and the Federal Reserve.
- The amount of currency created must continually expand.
— Posted Thursday, 18 August 2011
08/17/11 Jacobus, Pennsylvania – Last week, Fed Chairman Ben Bernanke shocked the world – or at least that portion of the world that tries to save money and earn interest – by announcing he would suppress short-term interest rates to near-zero until 2013.
Last Wednesday, the Chairman and his colleagues announced:
The [Federal Open Market] Committee currently anticipates that economic conditions – including low rates of resource utilization and a subdued outlook for inflation over the medium run – are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013.
Applying this perspective to monetary policy, the Fed promises – i.e., threatens – to maintain its failed policy of suppressing short-term interest rates, thereby punishing savers and promoting debt accumulating and consumption. This is an inflationary policy, which will continue to fuel the cost pressures that are already unfolding at many US businesses.
The 2-Year Treasury note yield collapsed to below 0.2% in the wake of the Fed’s policy announcement last Tuesday. As recently as April, when the 2-Year note yielded 0.75%, the market was expecting Fed rate hikes at some point before 2013.
The Fed has effectively decreed that the US Treasury shall pay no interest on notes issued with a 2-year or lower maturity…and not much interest on notes all the way out to the 10-Year.
With this week’s announcement, the Fed pinned the front end of the yield curve to zero. This action will act to lower the average interest rate of the national debt over the next two years, which is a wealth transfer from savers to the federal government.
This is all part of the “financial repression” as outlined by Bill Gross of PIMCO: savers’ wealth stored in banks and Treasuries will be clipped by a few percent per year, as rates remain well below inflation. This inflation tax is a wealth transfer to the government as it gets to spend the newly created money first, before it gets transmitted through the banking system (losing value in the process).
Read more: Thievery in Broad Daylight