Busted: Bankers and The Global Economy

September 2, 2008

Influence: Conventional Banking vs. Islamic

beating factionalized corporate banking

beating factionalized corporate banking

Conventional banking is struggling with its own destructive baggage and increasing loss of jobs while the Islamic banking market has seen expansion of 35% this year with more on the way.

Especially in America and Britain, conventional commercial banking and investment bankers are seeing continued pressures and contraction of demand for services along with a declining market. Islamic sources see nothing but promise for the future in an area that is vastly under-served. Conventional bankers are looking to expand continually into emerging markets in an effort to save themselves and spread the risk. Some are even attempting to break into the Islamic banking market with new thinking based on sharia law.

Commercial conventional bankers in the U.S. and Britain are firmly addicted to the liquidity of auctions from central bankers in those countries. International bankers and bank holding companies are not so fortunate in terms of easy cash. Instead, they are forced to seek investment from global sovereign powers in an effort to save their skin from an untimely demise, as they seek to prop up their failing bonds and investments. The dilemma stems from the excessive use of securitized bonds across the board as a means to boost profits. The cancer of these failing and often outright fraudulent bonds threatens to tumble the global commercial banking economy.

Global central bankers, often referred to on this website as the International Society of Bankers, have taken a step back from investing using the same parameters of the past. Instead they are either holding on to their money or finding new sources of investment like insurance and hedge funds.  Like the precarious global situation, this too will change. Meanwhile, central bankers hold on to the majority of gold and precious metals as they seek more of the same, viewed as the only truly secure means of monetary commerce. As they seek to increase their wealth and hold of power using paper money, most Muslim bankers seek to keep themselves free from the hold of global central bankers.

What the world has in the immediate future is a battle between the two for supremacy: the Middle East and Muslim sovereignty groups and the American, British, Swiss alliance with Roman Banking. The trickery and deceit of global central bankers has recently worked against the immediate power they hold as renegade Middle Eastern nations seek to carve out their own niche of prosperity. The ensuing battle should prove to be of great interest. ~ E. Manning


August 18, 2008

Will Global Confidence Cause a Chain Reaction?

Just a few weeks ago, U.S. Treasury Secretary Henry Paulson held that a bailout of Fannie Mae and Freddie Mac to be highly improbable, if not impossible. Now there is talk that an extraordinary Treasury capital infusion may be needed to restore faltering foreign demand for debt issued by Fannie Mae and Freddie Mac. The mortgage twins are the nation’s two top home funding sources that the government is willing to rescue to save the U.S. housing market.

Foreign central banks have dumped nearly $11 billion from the holdings of the “mortgage twins” in the last four weeks. They don’t plan to reinvest in force until the U.S. government is clear when it will back Fannie Mae and Freddie Mac.

Investors and foreign central banks may be concerned, but the reality of a bailout is academic. The entire fabric of the U.S. housing industry depends on the continued functioning of the mortgage twins. Unless foreign bankers and the Fed expect to pull out on their support of the U.S. economy, such paranoia is largely unwarranted. Obviously, the real concern for central banks is the value of the securities that the foreign bankers hold. Devalued securities diminish their investments; hence, their power. Monetary value has really come to be all about appearance and confidence. Central bankers won’t be caught holding any empty sacks in the name of tacit support. They are part of a chain reaction.

Mortgage bonds are trading poorly while investors wait for good news on Fannie and Freddie capital. Meanwhile, U.S. mortgage rates have climbed to their highest levels in a year in reaction to the contracting housing market. Both are part of a chain reaction.

Investors are momentarily in a mood of increasing nervousness about the global economy, with deteriorating growth in the United States, Europe and Japan now beginning to bite into “emerging markets.” There is a growing belief among investors that the world economy in general is at risk, and with it the emerging markets that have been a powerhouse of growth and investment gain over the past few years. The emerging markets cannot and do not stand on their own. At this stage of development, they are step-children of larger marketplace that isn’t all that sound to begin with. Investors are always ready to be nervous, especially in a time of volatility. They can be and usually are part a wild card in the chain reaction.

Oil commodities, which were up and making the world nervous are now down, making the world nervous. It would seem that the world is simply nervous and using oil as an excuse. Previously, oil was a great profit hedge. When the U.S. started openly discussing releasing a large portion of the Strategic Petroleum Reserve on the open market, investors backed off from the heady world of oil commodities. Naturally, they are taking it slow. Nobody wants to rock the boat too hard. This is part of the chain reaction.

Inflation is up, which has been blamed on Big Oil or at least on commodity futures through investment banks. Which came first, the chicken or the egg? While this topic is open for debate, global inflation is up after inflationary pressures shot up in the U.S. and the Middle East from overheated greenbacks. That doesn’t look to get better anytime soon, especially as long as the U.S. keeps stealing money from the taxpayers vis a vis the Federal Reserve. This is part of the chain reaction.

Global banker’s incessant worrying over their central bank interest rate is nonsense. Rates are so low as to have little effect in the real world. Commercial bankers are profiteering from borrowed central banking money as well as keeping their leaky banks afloat during this rough period. This is part of the chain reaction.

The single bright sector in banking remains in Islamic banking with a very different set of rules that bankers have yet to learn to exploit to full potential. In their worry, investors will look at this new hot market in hopes of developing new means of prosperity, which will likely mean a rise in power in Muslim nations. That is enough to worry many political persuasions worldwide as politics feeds into the monetary system. That is part of the chain reaction.

As economists, politicians, bankers, analysts and writers, we are always looking for an excuse, rationalization or explanation to meet a mindset. While most economists would tell you otherwise, it is not science, but rather a facet of human behavior. As such, economics enjoys the same ups and downs as human life does. That is part of the chain reaction.

June 3, 2008

Bernanke: Investor Profiteering Runs Amok

Ben Bernanke, Federal Reserve chief did an economic assessment for the International Monetary Conference is Barcelona, Spain. In his speech, he cleverly outlined, but separated the causes of the global financial crisis so as to not create any blame or responsibility. He outlined:
1. The U.S. housing boom,
2. A credit boom created by innovative lenders and investors,
3. unprecedented growth in developing and emerging market economies.

Bernanke spent an entire paragraph on blaming emerging nations, resulting in additional deficit in the industrial countries like the United States. Nowhere does Bernanke mention the burgeoning national debt of the United States, a huge flotsam of borrowed credit that continues to hold citizens of the United States and their children prisoner.

Bernanke noted “an increased appetite for risk-taking–a “reaching for yield”–stimulated some financial innovations and lending practices that proved imprudent or otherwise questionable. Regulators identified some of these issues in real time; for example, federal banking regulators issued new guidance on nontraditional mortgage lending and on commercial real estate lending.”

Strangely, bureaucrats of all kinds always suggest the panacea of additional regulation. The United States is full of endless rules, both effective and ineffective. How regulations are enforced or if regulations are enforced determines the effect. Yet, you will never hear of this truth. Lawlessness begets more lawlessness, not structure.

Bernanke rightly states that the housing boom came to an end because housing became unaffordable. Even creative financing could no longer sustain or bolster the market which was artificially inflated by “creative financing”.

Bernanke mentioned that “highly-rated corporations retain good access to credit, but credit conditions generally remain restrictive in areas related to residential or commercial real estate.” Highly-rated corporations, including corporate multinationals have achieved independence from national sovereignty and are largely unencumbered by financial credit access, much like the central bankers of the world. Multinationals can simply pick their deal from any country in the world. They are above, at least for the moment, the plight of economically strapped nations and are tied directly any nation of choice as it suits them.

Bernanke also notes that inflation remains high, but he fails to state the truth about how high inflation really is. TNTalk! notes that food price inflation is at 45% in the last nine months. That is a cruel inflation rate that most economists fail to deal with, let alone talk about. The Fed and U.S. federal government repeated fail to come clean by admitting theft by inflation.

Bernanke also points at futures commodity markets as the cause of price instability. “A rough stabilization of commodity prices, even at high levels, would result in a relatively rapid moderation of inflation, consistent with the projections of Federal Reserve governors and Reserve Bank presidents for 2009 and 2010… Another significant upside risk to inflation is that high headline inflation (perhaps referring to hyperinflation), if sustained, might lead the public to expect higher long-term inflation rates, an expectation that could ultimately become self-confirming.”

The paper tiger is unable to suggest a way to lessen the effect of profiteers in commodity markets. It would seem that investor profiteering is running the world amok.

September 11, 2007

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