Too Big To Fail
By continuously intervening in all of the markets, the Fed has destroyed the information transmission system that is built into freely trading markets. Time is starting to run out for ability of the U.S. to keep kicking the can of collapse down the road. We’ve come full circle, only with China in the Midas throne this time around. Eventually the world is going to revert back to a gold-backed currency system. When this happens, the U.S. will be required to demonstrate that it possesses the amount of gold that it reports to own. The only caveat here is that we believe that the U.S. will start WW3 before it’s forced to reveal the truth about its empty gold vault. That’s how broken our system really is…
"Solutions to the world's problems are not produced in a meeting between Bill Gates and George Soros... Renewal has to come from below... Limiting the influence [of the richest] is of the utmost importance... so that today's upper-class, high-finance capitalism can once again revert to being a capitalism of the real economy and the societal center."
The short answer, of course, is "nothing" - Congress, or the presidency, have been irrelevant ever since the Fed fully took over the US some time in late 2008. Since then, it has been the role of the central printer of the US, working on behalf of the US banking syndicate, to "get to work", and cover up the fact that Congress, its make up, or its decisions, are now inconsequential. Still, there are those whose job is to overanalyze everything, and those, whose ideological persuasion, is to believe that what there is a difference between the "left" and the "right." Still, since someone has to pay attention to the proceedings in the most farcical and polarized, if only for public consumption purposes, Congress in history may as well present what The Hill thinks will happen. Here are the five areas to watch.
When it comes to the Fed's QE3 generosity, what was the bottom line? Here is the answer.
"Since 9/11, those thank yous have been aimed at veterans with the regularity of the machine gun fire that may still haunt their dreams. Veterans have also been offered special consideration when it comes to applications for mostly menial jobs so that they can “utilize the skills” they learned in the military. While they continue to march in those welcome home parades and have concerts organized in their honor, the thank yous are in no short supply. The only question that never seems to come up is: What exactly are they being thanked for?"
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 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. The political system that stumbles to sustain the illusion that economies can be built on rampant financial instability, has also failed us. Past presidents talked of a square deal, a new deal and a fair deal. It’s high time for a stability deal that prioritizes the real financial health of individuals over the false one of financial institutions.
Europe is fast turning into a freak comedy show. Very fast. Or maybe we should say it’s always been one, and it’s just that the Larry, Curly and Moe moves are only now coming out in droves. Or maybe, what do I know, we’re just starting to understand how much talent for farce and slapstick the boys from Brussels have always had. Someone finish off that inane union before it starts to do real serious harm. Because it will.
Barack Obama and the Federal Reserve are lying to you. The "economic recovery" that we all keep hearing about is mostly just a mirage... For those out there that still believe that we are doing "just fine", here are 19 more facts about the messed up state of the U.S. economy.
One systemic source of rising inequality is crony-capitalism/crony socialism: the vast array of insider deals, collusion, winners being picked by the central state, too big to fail banks bailed out with taxpayer money, etc. People are increasingly aware the Status Quo is rigged, and the playing field is tilted to favor the few inside the crony-capitalist castle (what we call the New Nobility in a Neofeudal economy). As a society, we will have to deal with the reality that the nature of work is fundamentally changing, and wages are no longer an adequate means of distributing the surplus of an economy.
Expecting the state to truly reform the nation's engines of financialization is like asking the cocaine addict married to the wealthy dealer to divorce the dealer.
Regulators from the U.S. and the UK are in a “war room” today conducting financial war games to see if they can cope with fall-out when the next big bank collapses. "We are going to make sure that we can handle an institution that previously would have been regarded as too big to fail. We're confident that we now have choices that did not exist in the past," Osborne said at the International Monetary Fund's annual meeting.
Yesterday, in a periodic repeat of what he says every 6 or so months, Jamie Dimon - devoid of other things to worry about - warned once again about the dangers hidden within the shadow banking system (the last time he warned about the exact same thing was in April of this year). The throat cancer patient and JPM CEO was speaking at the Institute of International Finance membership meeting in Washington, D.C., and delivered a mostly upbeat message: in fact when he said that the industry was "very close to resolving too big to fail" we couldn't help but wonder if JPM would spin off Chase or Bear Stearns first. However, when he was asked what keeps him up at night, he said non-bank lending poses a danger "because no one is paying attention to it." He said the system is "huge" and "growing." Dimon is right that the problem is huge and growing: according to the IMF which just two days earlier released an exhaustive report on the topic, shadow banking (which does not include the $600 trillion in notional mostly interest rate swap derivatives) amounts to over $70 trillion globally.
The punchline, and what is by far the scariest, is that rising from 19% to a record 30%, and by far the biggest use of funds, is finance, the one industry that doesn't actually lead to growth but merely finds ways to mask the lack of growth with pro-forma adjustments and stacks leverage upon leverage on ever declining underlying equity and cash flows, until the entire system crashes as it did in 2001, 2008 and, well, soon.
When is the U.S. banking system going to crash? We can sum it up in three words. Watch the derivatives. It used to be only four, but now there are five "too big to fail" banks in the United States that each have more than 40 trillion dollars in exposure to derivatives.
- Showtime for Apple: Big phones, smart watches and high expectations (Reuters)
- Bank of England Gov. Mark Carney Signals Spring Rate Rise (WSJ)
- Quebec Shows Scots Question Returns Even If Answer Is No (BBG)
- Hush money with a 9 year vesting period: Ex-SAC Fund Manager Martoma Sentenced to Nine Years in Prison (BBG)
- Dreams on hold, Brazil's 'new middle class' turns on Rousseff (Reuters)
- Fed to Hit Biggest U.S. Banks With Tougher Capital Surcharge (WSJ)
- Egypt court sentences Brotherhood leader, cleric to 20 years in jail (Reuters)