The Epicenter of the Next Global Financial Crisis - Financial Dreadnoughts

The 'trigger event' for the next crisis could be elsewhere, someplace distant, and out of the way.  The first World War was ignited by a political assassination over a fractious disagreement in Sarajevo that engaged an international web of interconnections.

 

Granted that hubris was on a high note, particularly in Germany, and the system itself was fragile and deeply interwoven.

In the current global financial scenario, if the ripple of global interconnectedness reaches the New York (and European NationalBank Holding Companies), then the real crisis can take root and begin to knock down banks and national economies around the world.

12 Systemic Importance Indicators For US Bank Holding Companies

At that point the only rational response by the government would be to nationalize these Banks, and begin their orderly restructuring with losses ringfenced to investors and principals and creditors.

 

Of course that might not happen, since that was also the only rational response in 2008, and political power and influence and soft bribery prevailed.    And there has been very little reform, with the Too Big To Fail Banks becoming Too Big To Jail, and the real lords of the land.

 

Why do democratically organized nations allow such behemoths to grow even larger, and act with virtual impunity over the laws, and imperil their national health and welfare.   Because these outlandish financial monstrosities are the new battleships in a financial landscape in which political will controls money and wealth in ways never before seen, but far too often for the private gains of commercial moneyed interests.  War never changes.

And like the dreadnoughts from the last wars of the 20th century, they are already anachronisms, costing much more than they are worth.  The generals always seek to employ the old methods of warfare, even on unfamiliar landscapes.

 

Next time it looks like not only a 'bailout' but a 'bail-in' as well.   And the destruction of a free and honest financial system in the US will be complete.

 

Special thanks to Wall Street On Parade For this chart and the report link.

 

 

Nomi Prins: All the President's Bankers

This is a walk through the twentieth century, and how the United States became, by design, a combination military, industrial, and financial global superpower.  And how the US dollar hegemony was created over a number of political administrations by groups of well connected, powerful families and friends.

It may seem a bit long, but she opens it for questions about the 48 minute mark, so it really is not. Nomi speaks briskly with many fact laden vignettes and scenarios that help to explain how the current system has evolved.

The facts she brings out about the 50's onwards were sometimes new to me, and absolutely fascinating.   About minute 40 she shows the culmination of this historical process with the Clinton Whitehouse, and begins to describe where we are today, and how it appears that the problem will be insoluble without some major events taking place to change this alliance in power between the financial and the political.

 

The talk served to solidify some of my own thinking, and removed some of the shadows of doubt that I have had about where things are going and why.

 

She does is not able to delve into the international ties between the global central Banks, particularly between London and New York.  She instead concentrates on what she might call 'the Big Six' of American Banks, which is a large enough subject itself.

I strongly recommend that you listen to it if you are at all interested in this subject.

 

 Or if you have the time to invest, you may wish to read her book which also sounds very interesting.  I have not done so yet, and I am not sure when I could get to it. 

 

But this video is a very good start, and will probably make you much better informed than 90 percent of the people out there.  Whether that is a good thing or not is another matter.

Bill Black on the Rule of Predatory Finance Over Argentina

As you know I think that this ruling by the Supreme Court, written by Antonin Scalia, which essentially puts the Argentine people and the other creditors at the mercy of the demands of a few vulture funds, may prove to be a watershed, or perhaps trigger, event in the excesses of crony capitalism and the Empire of the Dollar. 

 

The blowback from this action on foreign assets held in the US, and on US corporate assets held overseas, may be profound.  

 

The BRICs will be having their annual summit in mid-July.   And the US has certainly given them something to think about,  set at least a part of their agenda,  and given them a common cause of concerns, over the past four or five months.   I see no reason for optimism that a ruling elite, grown in-bred and self-absorbed in its hubris, will do anything different in its self-serving policies.

 

If there ever was a time for enlightened leadership to rise to the occasion it is now.  And in looking over the current crop of puffed-up princes and predators, we can see none.

 

Cyprus Is Not So Much An Anomaly as the Template For the Next Financial Crisis

This is not so much anything new, but a concrete reminder of the breadth of systemic banking risks inherent in the Anglo-American banking structure in which depositor money is intermingled with the Bank's speculative interests. 

The repeal of Glass-Steagall stripped the average person of important and time-tested safeguards against loss.   Things are different now.

Any deposits you have at a bank in excess of 'insurance guarantees' are at risk in case of another financial crisis.

This exposure may include wealth you think that you own, but do not know exactly where and how it is being held. This may include 401k's and IRA's, pension plans, health insurance deposits, life insurance and annuities, and so forth.

MF Global was very instructive on how even cash deposits and physical assets backed by a certificate of ownership may be fair game for the banking system in the event of a crisis.

Nothing is perfect and foolproof, but there are degrees of safety.

And you may wish to consider that the next time something like Occupy Wall Street starts up and demands reform, don't stand by on the sidelines and join in with the orchestrated jeering from the one percent's water bearers.

Simplify, streamline, organize.

Demand serious, meaningful, and genuine reform and transparency in the banking and political system.

"The goal is to produce resolution strategies that could be implemented for the failure of one or more of the largest financial institutions with extensive activities in our respective jurisdictions. These resolution strategies should maintain systemically important operations and contain threats to financial stability.

They should also assign losses to shareholders and unsecured creditors in the group, thereby avoiding the need for a bailout by taxpayers. These strategies should be sufficiently robust to manage the challenges of cross-border implementation and to the operational challenges of execution...

But insofar as a bail-in provides for continuity in operations and preserves value, losses to a deposit guarantee scheme in a bail-in should be much lower than in liquidation. Insured depositors themselves would remain unaffected.

Uninsured deposits would be treated in line with other similarly ranked liabilities in the resolution process, with the expectation that they might be written down."

Bank of England and Federal Reserve Joint Statement on Resolving Globally Active, Systemically Important, Financial Institutions.

Related:
A Message From the Banking and Brokerage System
Lawmakers Must Heed the Wisdom of the 1930's
Why Has the Financial System Failed and What Are We Going To Do About It?
A Brilliant Warning on Robert Rubin's Proposal to Deregulate the Banks in 1995