Too Big To Fail
If we have learned anything since the global financial crisis peaked in 2008, it is that preventing another one is a tougher job than most people anticipated. Not only does effective crisis prevention require overhauling our financial institutions through creative application of the principles of good finance; it also requires that politicians and their constituents have a shared understanding of these principles. Today, unfortunately, such an understanding is missing. “Firefighting is more glamorous than fire prevention.” Just as most people are more interested in stories about fires than they are in the chemistry of fire retardants, they are more interested in stories about financial crashes than they are in the measures needed to prevent them. That is not a recipe for a happy ending.
Have you seen the economic recovery? We haven’t either. But it is bound to be around here somewhere, because the National Bureau of Economic Research spotted it in June 2009, four and one-half years ago. It is a shy and reclusive recovery, like the “New Economy” and all those promised new economy jobs. I haven’t seen them either, but we know they are here, somewhere, because the economists said so. At a time when most Americans are running out of coping mechanisms, the US faces a possible financial collapse and a high rate of inflation from dollar depreciation as the Fed pours out newly created money in an effort to support the rigged financial markets. It remains to be seen whether the chickens can be kept from coming home to roost for another year.
Most economic observers are predicting that 2014 will be the year in which the United States finally shrugs off the persistent malaise of the Great Recession. In contrast, we believe that the episode has, for the moment, established supreme confidence in the powers of monetary policy to keep the economy afloat and to keep a floor under asset prices, even in the worst of circumstances. The shift in sentiment can only be explained by the growing acceptance of monetary policy as the magic elixir that Keynesians have always claimed it to be. This blind faith has prevented investors from seeing the obvious economic crises that may lay ahead. Based on nothing but pure optimism, the market believes that the Fed can somehow contract its $4 trillion balance sheet without pushing up rates to the point where asset prices are threatened, or where debt service costs become too big a burden for debtors to bear. The more likely truth is that this widespread mistake will allow us to drift into the next crisis.
Bitcoin is rapidly becoming part of the everyday lexicon. Following David Woo's investigation, National Australia Bank's Emma Lawson looks at its creation, use, and quality as "currency," and find that Bitcoin meets most, but not all the conditions required to be a currency. Lawson concludes Bitcoin may not be the most efficient monetary system, given the costs to create, and that the supply set-up can be seen as both an advantage (hyperinflation is not possible) but also a disadvantage (there are conditions which may create deflation). But, if enough people believe in it, and use it, it may be here to stay as a payment system. Simply put, its success (or failure) will depend on establishing trust and adoption.
December 23rd, 1913 is a date which will live in infamy. That was the day when the Federal Reserve Act was pushed through Congress. Many members of Congress were absent that day, and the general public was distracted with holiday preparations. Now we have reached the 100th anniversary of the Federal Reserve, and most Americans still don't know what it actually is or how it functions. But understanding the Federal Reserve is absolutely critical, because the Fed is at the very heart of our economic problems. Since the Federal Reserve was created, there have been 18 recessions or depressions, the value of the U.S. dollar has declined by 98 percent, and the U.S. national debt has gotten more than 5000 times larger. This insidious debt-based financial system has literally made debt slaves out of all of us, and it is systematically destroying the bright future that our children and our grandchildren were supposed to have. The truth is that we do not have to have a Federal Reserve. The greatest period of economic growth in U.S. history was when we did not have a central bank. If we are ever going to turn this nation around economically, we are going to have to get rid of this debt-based financial system that is centered around the Federal Reserve. On the path that we are on now, there is no hope.
Overstock to Accept Bitcoin Starting In 2014
Do we need a banking sector dominated by politically untouchable "Too Big to Fail" (TBTF) banks? Thanks to fast-advancing technology, the answer is a resounding no. Not only do we not need a banking sector, we would be immensely better off were the banking sector to wither and vanish from the face of the Earth, along with its parasitic class of political enablers, toadies and Federal Reserve apparatchiks.... An automated banking utility has no need for parasitic bankers or politicos or indeed, a central bank. The only legitimate regulatory function of the state is to enforce transparency; beyond that, its actions are all subsidies of one sort or another of politically powerful constituencies at the expense of the real economy's productive people, communities and enterprises.
During 2013, America continued to steadily march down a self-destructive path toward oblivion. As a society, our debt levels are completely and totally out of control. Our financial system has been transformed into the largest casino on the entire planet and our big banks are behaving even more recklessly than they did just before the last financial crisis. We continue to see thousands of businesses and millions of jobs get shipped out of the United States, and the middle class is being absolutely eviscerated. Due to the lack of decent jobs, poverty is absolutely exploding. Government dependence is at an all-time high and crime is rising. Evidence of social and moral decay is seemingly everywhere, and our government appears to be going insane. If we are going to have any hope of solving these problems, the American people need to take a long, hard look in the mirror and finally admit how bad things have actually become.
If policymakers were gunfighters, they’d be out of bullets: They have run out of effective policy tools to improve the economy.
So the question is simple: If there is a recession in 2014, and policymakers are out of bullets, how will it play out across the American economy?
Before you buy the dip "because this Bull market will run until 2016," please ponder this chart... Empirically, the stock market advances when credit is expanding and declines when credit growth slows. If credit expansion leads the stock market, the market is in trouble...
Volcker Rule - Who cares? I know we are supposed to care more about this convoluted rule, but we just can’t. The concept that somehow “prop” trading brought down the banks seems silly. The idea that market making desks were a dangerous part of the equation is ludicrous. They could have fixed this with a few simple changes, but that would have meant some blame would have had to be shifted onto the regulators...
The FSB's first chairman was Mario Draghi, current President of the European Central Bank, while its current chairman is Mark Carney, Governor of the Bank of England. The inclusion of Financial Market Infrastructures means that large parts of the global financial system is susceptible to bail-in and could potentially be bailed-in including exchange traded funds.
The too big to fail banks have a larger share of the U.S. banking industry than they have ever had before. So if having banks that were too big to fail was a "problem" back in 2008, what is it today? The total number of banks in the United States has fallen to a brand new all-time record low and that means that the health of the too big to fail banks is now more critical to our economy than ever. In 1985, there were more than 18,000 banks in the United States. Today, there are only 6,891 left, and that number continues to drop every single year. That means that more than 10,000 U.S. banks have gone out of existence since 1985. Meanwhile, the too big to fail banks just keep on getting even bigger.
With Top 4 US Banks Holding $217 Trillion In Derivatives, Total Number Of US Banks Drops To Record LowSubmitted by Tyler Durden on 12/03/2013 10:49 -0400
Overnight, the WSJ reported a financial factoid well-known to regular readers: namely that as a result of a broken system that ever since the LTCM bailout has encouraged banks to become take on so much risk they become systematically important (as in their failure would "end capitalism as we know it"), and thus Too Big To Fail, there has been an unprecedented roll-up of existing financial institutions especially among the top, while the smaller, less "relevant", if far more prudent banks have been forced out of business. "The decline in bank numbers, from a peak of more than 18,000, has come almost entirely in the form of exits by banks with less than $100 million in assets, with the bulk occurring between 1984 and 2011. More than 10,000 banks left the industry during that period as a result of mergers, consolidations or failures, FDIC data show. About 17% of the banks collapsed."
Confirming that the brotherhood of the "fairness doctrine" in which everyone is equal to everyone else (but some are too big to fail or prosecute, and are thus a little more equal) will have to do much more work to bring wayward Swizterland, home to some of the world's biggest companies, fattest bank accounts and wealthiest individuals, into the socialist fold was the announcement moments ago that Switzerland roundly rejected a proposal to limit executive salaries to 12 times that of the lowest paid employee, with 66% of the voters opposing. This so-called "1:12 initiative for fair pay," was brought about by the youth wing of the Social Democrats (JUSO) which claimed that nobody should earn more in a month than others earn in a year. The outcome is notable because it was in March when Swiss voters backed proposals to impose some of the world's strictest controls on executive pay, with some 70% of voters thought to have supported plans to give shareholders a veto on compensation and ban big payouts for new and departing managers. Surprisingly, just over six months later, the drive to bring more equality to all appears to have lost it steam.