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.

 

 

Reinventing Bretton Woods: Global Finance In Transition - Currency Wars - Exorbitant Privilege

As you may recall, Bretton Woods was the name of the conference, taken from its location, that set up the post World War II international currency arrangement with the US dollar as the reserve currency of the world. It was based on a dollar convertible in gold.

When Nixon arbitrarily shut the 'gold window' in 1971 the world entered a reserve currency system of purely fiat dollars, often called Bretton Woods II.

There are a number of theories that suggest that such a system is not sustainable, for many of the same reasons that the euro is not sustainable. 

And as some have remarked, the control of a currency by a small group of men operating in private is an exorbitant privilege.

But putting that aside, the BRICs in particular are not happy with the existing arrangement which has been slowly falling apart for some time as the Federal Reserve imposes its domestic needs and policy on what is intended to be the rest of the world's currency. It finds itself in much the same position as is Germany in the EU.

I have addressed this many times before, suggesting that the eventual outcome may be a reconstituted SDR-like instrument based upon a broader basket of currencies and the inclusion of gold and perhaps silver as well.

The Anglo-American banking cartel are fighting this at every turn, because as we know to control the world's currency brings remarkable power. I suspect quite of bit of the hysterical antagonism against gold and silver is tied up in this.  And an ardent desire to 'cover up' some of their past shenanigans.  Germany should put pictures of its gold on milk cartons.

It is possible that they will thwart the objectives of this effort and most likely this conference. And what will happen then is a continuing fragmentation of the world into regional trading zones and spheres of influence.

This may be used as a reason to propose a one world government, that will be similar in composition to the European Union and controlled by a few elite politicians and their bureaucrats. 

We are eyewitness to one of the great events of economic history, and if anything it is remarkable how few economists and politicians understand what is happening. They are firmly embedded in their theory, and too often are willfully blind. 

Let us free markets from regulation, the Banks from restraint of law, and the money creation process from the bindings of oversight and transparency, and we will reach new pinnacles of prosperity.

I find that a well educated layman with a grounding in history and the practical side of finance and business has a better understanding of what is going on than the great bulk of theoreticians whose models are heading quickly towards the dustbin. I just read a strikingly good letter from my friend Hugo Salinas-Price, that proposes a basic model for regulating international trade.

And I told him it would get nowhere, even though it was probably directionally correct, and about as good a start as many I have seen. The status quo and their hounds would rise up against it, because they are not ready to accept change.

They will produce many weighty and learned papers that 'prove' that it is wrong. And they will twist and torture the data to serve their ends no matter what the data may actually say.  The Rogoff-Reinhart scandal is not an outlier in what is a generally disgraced profession.  But these are signs of the times, where there is little downside and enormous profits for deceit in the obsessive pursuit of money and power, at least for the exorbitantly privileged.

Money is power, and those who love power above all seek to control any and all changes to its structure, for their own ends.

Global Finance in Transition conference to take place in Istanbul


On May 7-8, 2013, Istanbul (Turkey) will host the Global Finance in Transition conference. The event is organized by the Central Bank of the Republic of Turkey jointly with the Reinventing Bretton Woods Committee and the Russian Ministry of Finance.

Representatives of G20 finance ministries and central banks, international organizations, research institutions and businesses will take part in the conference. Head of Turkey's Central Bank Erdem Basci, Deputy Minister of Finance of Russia Sergei Storchak and Executive Director for the Reinventing Bretton Woods Committee Marc Uzan will give the opening remarks at the conference.

Five panel discussions are planned as part of the event. They will cover the international financial architecture, in particular, changes in the flow of global investments, local bond markets and growth in emerging economies, incentives and determinants of investment and other issues.

In addition it is expected that new instruments and incentives for making the global financial system safer will be suggested during the forum.

You may visit the conference web site by clicking here.

Related:

Currency Wars Part II
Currency Wars
Russia Stockpiling Gold Likely For a New Trading Currency
Devaluing the Dollar, Against What?
What Will the World Reserve Currency Become?

This is the lesser known entry in the private contest that spurred Shelley to write his famous Ozymandias.

"In Egypt's sandy silence, all alone,
Stands a gigantic Leg, which far off throws
The only shadow that the Desert knows:
I am great Ozymandias, saith the stone,
The King of Kings; this mighty City shows
The wonders of my hand. — The City's gone,
Nought but the Leg remaining to disclose
The site of this forgotten Babylon.

We wonder, and some hunter may express
Wonder like ours, when through the wilderness
Where London stood, holding the wolf in chase,
He meets some fragment huge, and stops to guess
What powerful but unrecorded race,
Once dwelt in that annihilated place."

Horace Smith, Ozymandias, 1818