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US Government's "New Rule" Allows Banks To Completely Make Sh#t Up
Submitted by Simon Black via Sovereign Man blog,
In 1494, a 47-year old Franciscan friar named Luca Pacioli invented something that was revolutionary.
Pacioli was, in fact, a friend and contemporary of Leonardo da Vinci, and the two collaborated frequently.
So you’re probably guessing that Pacioli was a co-designer in Leonardo’s famed flying machine, or a new architectural technique.
On the contrary.
Pacioli’s invention was the double-entry accounting system; in fact he’s known by bean counters today as the father of accounting.
This was a major and much needed innovation at the time.
In the 15th century, Italy was dominating global trade and commerce.
Yet unlike in the centuries before where merchants were primarily transporters and traders of exotic goods, 15th century merchants had essentially become proto-bankers whose primary business was extending and trading credit.
This was a major change in the way that business was done, and it absolutely demanded a new way to keep track of it all.
That’s exactly what Pacioli invented. And his system of accounting is still being used today, over 500 years later.
This was a seminal moment in business history—the near simultaneous birth and convergence of credit-based money, banking, and accounting that would eventually become the global financial system.
It revolutionized everything.
Back then, just as today, few people really understood it. And those who did were often clever enough to find loopholes in the system to hide their fraud. Especially banks.
There are some really stunning (and sometimes hilarious) examples of early banks who learned how to cook their books and misstate their capital using Pacioli’s system.
Curiously very little has changed. Banks still use accounting tricks to hide their true condition.
Bloomberg showcased one such technique last year, exposing the way that many US banks are rebooking their assets from “available for sale (AFS)” to the “held-to-maturity (HTM)” designation.
This is a very subtle move that means nothing to most people.
But to banks, it’s a highly effective way of concealing losses they’ve suffered in their investment portfolios.
Banks ordinarily buy bonds and other securities with the purpose of generating a return on that money until they have to, you know, give it back to their depositors.
That’s why they’re called “available for sale,” because the bank has to sell these assets to pay their depositors back.
But here’s the problem– many of these investments have either lost money, or they soon will be. And banks don’t want to disclose those losses.
So instead, they simply redesignate assets as HTM.
It’s like saying “I don’t care that these bonds aren’t worth as much money as when I bought them because I intend to hold them forever.”
Thing is, this simply isn’t true. Banks don’t have the luxury of holding some government bond for the next 30-years.
This is money they might have to repay their customers tomorrow, which makes the entire charade intellectually dishonest.
That doesn’t stop them.
JP Morgan alone boosted its HTM mortgage bonds from less than $10 million to nearly $17 billion (1700x higher) in just one year. This is a huge shift.
Nearly every big bank is doing this, and is doing it deliberately. This is no accident. And there’s only one reason to do it—to use accounting minutia to conceal losses.
But the accounting tricks don’t stop there. And in many cases they’re fueled by the government.
One recent example is how federal regulators created a new ‘rule’ which allows banks to consciously reduce the risk-weighting they assigns their assets.
The Federal Financial Institution Examination Council recently told banks that, “if a particular asset . . . has features that could place it in more than one risk category, it is assigned to the category that has the lowest risk weight.”
This gives banks extraordinary latitude to underreport the risk levels of their investments.
Bankers can now arbitrarily decide that a risky asset ‘has features’ of a lower risk asset, and thus they can completely misrepresent their investments.
Bottom line, it’s becoming extremely difficult to have confidence in western banks’ financial health.
They employ every trick in the book to overstate their capital ratios and understate their risk levels.
This, backed by a central bank that is borderline insolvent and a federal government that is entirely insolvent.
It certainly begs the question—is it really worth keeping 100% of your savings in this system?
I would respectfully suggest finding a new home for at least a portion of your savings.
After all, it’s 2015. You no longer need to bank in the same place as you live and work.
It’s possible to establish an account offshore—at a safe, stable, well-capitalized bank overseas in a country with no debt.
You might even find that the bank will pay you a reasonable interest rate that actually exceeds inflation (shocking!).
And in many cases you may be able to do all of this without leaving your living room.
It’s hard to imagine anyone would be worse off.
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Yes, this will end well...
Given that all banks are insolvent by definition, cooking the books really doesn't mean much anymore.
But they'll taste better when the bankers are force fed them.
Thats why mattress stawks are on fire if you get my drift
Weimar is repeating. Ho hum de dum.
great article.. until its concluding suggestion
put your savings in an overseas bank? WTF? with 30%+ currency revaluations overnight? With Cyprus-style bail ins ready to roll out globally?
Sorry mate, im keeping my store of wealth in precious metals outside the banking system
"To Completely Make Sh#t Up"
Hey! isn't that what the corrupt divisive despicable incompetent arrogant narcissistic illegal indonesian kenyan alien muslim sociopath pathological liar in chief fudgepacker does every time it opens it azz burger mouth and flaps its gums..... Y the frack doesn't the thing just STF!!!
"...if a particular asset . . . has features that could place it in more than one risk category, it is assigned to the category that has the lowest risk weight.”
HAH!... and to think Star Trek tried to convince me as a child that we as humans would someday "outgrow" our need for material wealth... Star Trek was clearly intended as comedy.
Just steal everything.
Define
particular asset
has features
that could
risk category
risk weight
None of this will ever be defined outside of a court of law and even if it is somehow "defined" you can be assured the statute of limitations will have run out.
my neighbor's mother makes $86 /hr on the computer . She has been laid off for 10 months but last month her pay was $21128 just working on the computer for a few hours. go to the website... www.globe-report.com
And I haven't had any confidence in them for decades now. They are criminal enterprises that have been allowed to exist as long as they pay their vig to government, and facilitate the theft of our futures. DEBT
the banker r the fucking government...
how many fucking times do u have to be told!
DEATH TO TME MONEYCHANGERS.
Why not just join them?
I don't think you understand the application process.
"the banker r the fucking government..." I get that, but it's not entirely true, and how did we get here in the first place? We no longer have capitalism or free markets in the west, we have centrally planned economies. It's one of the reason the old soviet union went bankrupt, everyone worked for the gov. The goverment machine has grown to a point that it cannot exist without borrowing and selling it's citizens future and their children to the globalist bankers. Collapse is the only solution.
Centrally planned is socialism when capitalism has failed.
Free market capitalism did not fail.
It was perverted into slave market piracy.
No other outcome was possible. Unless you can suggest a realistic method to prevent people from leveraging wealth into political power.
Legalized bankster fantasy accounting has been a hot subject round here for some time .... specially the part about nobody going to jail for outright fraud.
I have nothing relevant to say, other than a big thank you for ZH and the posters here. This place is my intellectual oasis in this desert of depravity & stupidity. I will miss you guys when all this ends & we have to resort to tin cans & string...
Better yet. Get your Ham Radio license. Hard for government to control the airways, especially if you transmit by Near Vertical Incidence Sky Wave (NVIS) (High frequency transmission via low height dipole antenna.)
The end of the old system is necessary. I'm coming out the other side stronger than ever.
Yep called evolution.
Worth means nothing I only train for war ... me against the rest and no more rules :-)
We here at ZH have known for a long time this was coming,,,this creeping coup and the acceleration begins..I'm an atheist but for some unknown reason to me I'm compelled to say GOD help us all.
When the SHTF I have to concur with taoJones,,,I'll miss this place.
kill switch
There are no athiests in foxholes.
And there's no celestial dictator in the clouds that I subordinate myself....He demands that I love him and fear at the same time,,sounds like sadomasochism to me...If that’s your game enjoy.. By the way can we gather all the priests and other professional con men that are hiding in the Vatican like Bernard Law after having their enjoyment with little boys????
It always amazes me that the grass is greener on the other side of the fence. In other words, you can't trust banksters here, but you "can" trust banksters in another country. Banking today is kinda like living in a certain place (near Versuvius) in Italy. " Today, it is regarded as one of the most dangerous volcanoes in the world because of the population of 3,000,000 people living nearby and its tendency towards explosive (Plinian) eruptions." Yes, I know it's a beautiful place. Every person chooses their own poison.
There's always little old New Zealand. http://alexandra.ljhooker.co.nz/8AGGME/96-mcintosh-road-rd-1-blackmans 20 acres of flat land in the middle of vineyard and orchard country. Gets 3 million litres of irrigation water a week. Has it's own well for house water & generates it's own power from it's own solar array.
Been there cause I saw this coming many years ago. I've traveled the World looking for liberty and there's no escape dude. If you look deeper, it's just nice weather and scenery. You have to fight for what you believe in dude, and make it through the fire to the other side.
Abstract. A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution. Digital signatures provide part of the solution, but the main benefits are lost if a trusted third party is still required to prevent double-spending.
We propose a solution to the double-spending problem using a peer-to-peer network. The network timestamps transactions by hashing them into an ongoing chain of hash-based proof-of-work, forming a record that cannot be changed without redoing the proof-of-work. The longest chain not only serves as proof of the sequence of events witnessed, but proof that it came from the largest pool of CPU power. As long as a majority of CPU power is controlled by nodes that are not cooperating to attack the network, they'll generate the longest chain and outpace attackers. The network itself requires minimal structure. Messages are broadcast on a best effort basis, and nodes can leave and rejoin the network at will, accepting the longest proof-of-work chain as proof of what happened while they were gone.
https://bitcoin.org/bitcoin.pdf
Document it & call it a feature.
Im a banker. Here is a message. Shits gonna get real... Barter is better. Remember I said that you sheep.. (sarc)
Earn an interest on capital or actually get your capital back? Gold for the long term!
So this is a new rule that just simply allows them to do what they were already doing?
"a safe, stable, well-capitalized bank overseas in a country with no debt."
Now, where the hell can I find such a place?
I strongly believe that if there were no banks, there would be a sharp reduction in wars, the drug trade, and poverty.
Without banks, we might even have some semblance of democracy. Instead, we have a surveillance society enforced with police state tactics.
It's no accident that on the back of the one-dollar bill is a pyramid with an all-seeing eye, the symbol of the banker elite.
Abolish the banks.
in the Orwellian world of finance,
post 1984, i have no idea what
the term "financial health" might
possibly mean. lost ....
When you can create fiat with NO accountability the whole concept of what something is worth becomes meaningless.
double-plus un-broke!
Can I guess that 'financial health' means you haven't quite been completly bled out?
As someone said up top if doing away with Mark to Market, wasn't enough, we add one more layer of fraud to our stable banking system. The envey of the rest of the world. It amazes me how long this ponzi has lasted, and remember, that all those European banks that carry all that sovereign debt will be payed back too.
There are many many ways to hide loses. Common in Poland is you create trade mark, some logo crap like coca-cola but actually worthless like "I like tities" sign on red circle, and you value it at 1 trillion USD and you add it as intelectual value to assets. This is fully legal.
You had me at titties
Hey, Mr. Lucky, here, safely ensconced in the warmth of my den inside my 1682 square foot home which the bank has been suing in foreclosure for 59 months and I've been living in virtually rent-free for 67 months. They have it on their books at fair market value of 120K, when in reality it may be worth only around $65K. So, yeah, they make shit up.
It has been a treat, but I know that all good things come to an end, so I'm buying a small motor home for the day when the SHTF. I'm virtually guaranteed of being here until September, due to my ability to file motions, but I will be prepared for the day - if it indeed ever comes - that the bank says GTFO.
They do make shit up. All of the docs in their foreclosure suit are fake, fake, fake.
A yea that's a good solid & prudent paradigm for the planet to operate in.
So now that nearly the Whole planet knows what going on anybody really think they have an escape plan ther than WWlll ?
The stupid it burns....
Da Da Dat Da Da Da Da.....
https://www.youtube.com/watch?v=_-SNrvHdZJE
When I peg it and nothing against ZHers I pray for the toal destruction of this little rock floating in space. IT REALLY MEANS JACK SHIT TO ME.
Over and no more suffering for population of a failed species for eternity.
- A. Jackson
Joke is we used to believe them.
Fuck that right out of here the increase in holding forever is because that in itself is a derivative of a debt that will never be paid. Do me a favour,kill the money creation so we can see exactly how much shit we are in
1 billion in held forever debt = 1 billion back in newly created fiat.
is it worth keeping 100% of your savings in this system?
No. Keep ZERO savings in this system!
-----
If you must, keep < 1% in checking accounts to pay bills.
I don't even do that any more.
-----
PS: One reason the fed doesn't want an audit is... they don't want anyone to know they've created many trillion fiat dollars off the books and just handed it to their owners and cronies. 200 proof corruption.
my off-shore bank account is off the lake-shore in a boat that sank mysteriously.
Banksters "Sh#t " is now an Official asset.
Depending on who "Smells" it decides the value of the asset.
Ach So, now it's official. Bank Assets are CRAP.
And since they mix it with other so called assets as currencies etc, the "Smell"encompasses all and all assets become "Smell" assets.
Now officially the currencies of those countries which follow such "Smell" accounting can be called CRAP.
And since the US is the first to institute "Smell" accounting, the Dollar is now officially CRAP.
And we all know that the US Treasury Bond has only one Buyer for all this CRAP
All together now, let's sing: "Happy Days Are Here Again...."
Just don't get any smartass ideas like auditing the Fed or prosecuting bankers personally.
Wonder what totally non STANDARD & extremely POOR has to say officially about this accounting amendment.
Possibly very happy since they can attribute anything they wish for any rating they provide.
US always "Smells" good. The rating is therefore AAA. And anyone like the previous CEO "Smells" different he has to make an exit.
When will the rest of the world throw out S& P from their shores !!!!.
"it’s becoming extremely difficult to have confidence in western banks’ financial health."
Ya think?
Mark to Mayhem. Just invent stuff and lie. There never, ever will be any repurcussions. Just say you are sorry.... make sure it is late in the game.
you're kidding us here right Tyler(s)?
This is simply an extension of what (obviously) started with the suspension of mark to market for the banks in 2009.
That event marked the first time the Banksters "tipped their hand" so common ordinary people could see that the government was actually in the pocket of the big banks and that "transparency" in accounting terms was a Huge Lie.
Nothing has changed.