Busted: Bankers and The Global Economy

June 14, 2009

Recovery: New Technology and Financial Literacy With a Glimmer of Hope

There are signs that the rapid decline in economic activity of the past few quarters is slowing. Per the observation by the Federal Reserve, stabilization or improvement will begin from very low levels compared with those the levels of previous recoveries. This recovery is likely to be painfully slow and “the economy unusually vulnerable to new shocks. The news remains bad in two areas of direct importance to American families: Unemployment continues to rise and housing prices continue to decline.”

“Government-provided liquidity and guarantees remain as necessary supports in many areas. Because the collapse of these same markets set off the present crisis and the serious recession that has followed, the case for far-reaching reform appears a strong one.”

The Federal Reserve admits the fact that banks are highly leveraged, presumably due to the fractional reserve backlash in this crisis and compounded by creative banking instruments that have brought the system to its’ knees. Many bankers have been highly creative in protecting themselves from public or government scrutiny on an ongoing basis.

The Fed readily admits:

“that a malfunction in the financial industry can immediately and profoundly harm the entire economy…As we have seen to our dismay in the last year, even where such support is forthcoming, the resulting damage inflicted on the real economy by the financial sector can still be extensive, and the potential costs to taxpayers can still be high.”

financial literacyFor some time, the Federal Reserve has heralded the idea of financial literacy as if it were some ‘new technology’. Now the Fed has realized its’ own training regarding the need for a new financial literacy. The Fed now admits “that systemic risk was very much built into our financial system,” spotlighting the too-big-to-fail phenomenon as one of the most problematic systemic risks in the financial system.

Many members of the Fed now admit that we much apply ‘new technology’ to financial literacy and systemic risk in an effort to overcome the greed syndrome that has wracked U.S. and global banking for the last several decades. The problem remains that central bankers, like the Federal Reserve, are now in charge of implementing policy that can pad and perpetuate their own bottom line and purpose for existence since all central bankers are, in reality, a closed brotherhood or society devoted to their own corporate and global power in the financial system as they tap profits from their own system to benefit the global system and the shareholders of the global corporate central banking system. ~ E. Manning

March 13, 2009

Can the Economic Crisis Be Resolved?

nauseating crisis

nauseating crisis

Bankers have been treated like bad rich kids with every need met so that Daddy Government isn’t so embarrassed. This was the public relations idea that hasn’t worked. As a result of this public relations nightmare, the federal government has continued to overextend itself in the name of security and confidence as the instrument of last choice. Oh really?

As a result of this mindset, the Treasury has run amok in a virtual panic through the system looking for toxic debts and tried to figure out the crisis using the best brainpower that is available with banking debt so complex as to make you give up. That is what Hank Paulson did. Banks continue to snivel about their needs within the broken system that they created.

What’s worse, the world of top-notch education and best brainpower available coupled with self interest has brought the nation, albeit, the world to its’ knees with only excuses for any hope of redemption. Paulson couldn’t find all the debt or deal with the tentacles of the impossible situation.  Timothy Geithner still isn’t thinking outside the box of rules he is used to. Paulson’s terminal frustration and Geithner’s government-man thinking don’t have to be. They have been beholden to the system. There is a solution.

This solution is much the same as the raw deal handed out to homeowners in do-it-yourself mortgage crisis that continues to beleaguer the nation of taxpaying American citizens. The nation is threatened, say those of superior intellect,  because ‘undereducated Americans’ can’t seem to get it together. Bankers and servicers have done little or nothing to stem the tide of foreclosures because there is little self-interest in doing so in the short-term. The short-term is the measuring stick of capitalism today.

Since bankers and their ilk are so highly educated with plenty of basic internal resources, the Federal Government needs to install a new idea that involves do-it-yourself capitalism. This do-it-yourself system takes the burden from Daddy Government’s hands and puts the responsibility squarely on the shoulders of those that spawned the crisis. Daddy Government isn’t going to be involved any more beyond the cleaning up by the FDIC, but Daddy is going to supply the credit tools necessary to do the job.

banking-hourglassUncle Hank couldn’t find all the toxic debt which ultimately ended the bailout that the nation had intended. However, in the world of banking capitalism,  rest assured that if you have toxic debt, you know it. Banks are hiding toxic debt based on their own fear and trepidation, the ultimate public relations nightmare.

Enter Ben Bernanke’s Federal Reserve, the answer to all liquidity. Set up yet another credit window, this time wholly financed by the Federal Government. This doesn’t mean that the other tools used by the Fed aren’t financed by the taxpayer and the federal government, but I digress.

In this case, the suffering banker knows of his liquidity issues and always has. This time, instead of expecting the Treasury Secretary to come to the rescue, the bankers are to cash out their toxic debt at a preassigned value as presented to the Fed. Think cheap. Think bargain basement. The Fed, using credit guaranteed by the American taxpayer (of course) will issue monetary credits to the bank in exchange for ownership of the toxic debts in a nationwide fire sale of sorts. The toxic debts are and most likely, forever will, be worth virtually nothing.  They will be removed from the system and these flawed toxic debts will never be sold again. We will plan to eat the cost. The responsibility is on the bankers which is exactly where it should be. To make life good, everything will be publicly anonymous to save the possibility of embarassment.

In exchange for this generosity and real bailout by government, these banks will guarantee in blood that all monies received for such bailout will be used to fund loans to taxpayers and small businesses with relaxed terms that generally creditworthy citizens and business in today’s economic climate can meet. In other words, stable income is required, but no more endless profiteering and nitpicking that banks love to keep their credit out of the system. For large bank holding companies that hold toxic debt and cannot directly assist in rebuilding the economy and improving liquidity to the economy, there will be no further bailout.

The first part of the plan would be enough, but the second part of this plan is sheer genius, but not for greedy capitalist bankers.

In the second phase of the plan, bankers will be required from a certain date in the immediate future to update cash holdings for their fractional reserve. Instead of being able to loan out 90% of cash holdings, they will be required to hold on to 20% their holdings without loaning them out. This will allow an extra margin of security since the traditional 10% hasn’t worked to keep banks solvent. The reality is this, like it or not: the fractional reserve of 10% is part of what got bankers into this mess with toxic debt. The idea of easy money is what fueled the crisis. Money is no longer going to be so free and easy for bankers. They will be living on less and making more loans or cease operation and sell off their accounts. An uncooperative greedy banker is the worst sort of animal. It is time to remedy that problem with a little less manufacturing of money. 80% of new loans out of thin air fueled from deposits and downpayments will be enough. Bankers will now be keeping 20% on reserve instead of the traditional 10% moving forward. Of course, this will involve keeping two set of books, one for old loans at the traditional old rate and another for continued business, but bankers are good at keeping books. Will bankers buy the idea? There won’t be any choice if they want to survive. What is best is that no nationalization will be required, an action that renders zero benefit to the taxpayer. ~ E. Manning

November 15, 2008

Video: Money is Debt, Debt is Money

Filed under: banking, government, money — Tags: , , , — digitaleconomy @ 9:00 am

Zeitgeist: Addendum

A Must See Video

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 19, 2008

All Quiet on the Western Front

Overall the news has been moderate with folks talking on and off about recovery sometime next year. Earlier in the day, the scuttlebutt was about recession concerns and corporate defaults, but later in the day, that worry had faded compared to inflation fears. Fear is what we have sold ourselves as the bankroll of greed and carelessness. Banks think that they have managed their resources well as they have cut back and are watching for corporate defaults as several prime economies continue to decline. Authorities are quiet, waiting for the next shoe to drop with inflationary and recessionary pressures.

The only man with a soul in the Federal Reserve, Richard Fisher, has been complaining about the refusal of the Federal Reserve to do anything meaningful about inflation. He proclaims food and oil prices have “overshot” on the upside, and that the Fed cannot afford to “gamble away” its credibility by failing to act against inflation. Strangely, based on what overseas influence says, the Fed has already done just that based on talk from as long as a few months ago. The Fed has no credibility. However, the Fed’s credibility is a symptom of banking abuse, by now a tired haggard topic. Raising interest rates is all the Fed can really suggest to combat inflation. Intelligent people know that Fed interest rates have little to do with inflation or recessionary recovery. Maintaining a viable economy is the key. Politicians have forgot that.

The Federal Reserve is in disagreement about what they can do to stem the tide of increasing and debilitating inflation. A few say that tightening the credit market is the answer. Inflation is double the Fed’s underestimated estimates and expectations. That reality isn’t much different than Europe. Inflation is a symptom of a lack of economic viability. The U.S. economy and global economy is rife with overprinted devalued greenbacks much like a cancer. Authority is focused on economic keys instead of allowing the individual to prosper.

Central bankers and economists really don’t know what to do about inflation, much less admit the real severity against global economies. The reality is that once a downward cycle begins, quietly waiting is the single best thing that can be done as the correction made by peoples and businesses in the economy adjust to the current economic reality. There is no disgrace in recovery for that is exactly what we want. A return to what brought the U.S. and the U.K. to the current recession is exactly what we don’t need. Bankers need to be bent over and heavily spanked for they are the ones that have precipitated the crisis we are dealing with aside from the fact that the country has lost its’ soul where independent job creation is concerned. The problem has become systemic because of the insistence on the U.S. government on crippling personal control.

The reality is that bankers have a huge advantage with the fractional reserve. The are able to loan out 90% of everything they have on the books over and over. In that regard, the banker’s ability to make money would seem almost limitless, but that isn’t enough for them. Instead, they have developed creative banking instruments like CDOs, designed to catapult profits into the stratosphere. Bankers abused the mortgage marketplace for predatory and creative profit, selling off loan securities to investors. That was unsustainable and dangerous. Instead of doing what bankers do best, the boring hum-drum of bean counting with interest and closely judging and rating those they loan to, they have involved themselves in gross speculation. Unfounded speculation is the debacle and outlook that the world has been hesitant to stop because of the temporary glory of profit. We have become a nation, even a world of shiftless gamblers with an aversion to hard work of any kind.

Everyone is worried because, as Standard and Poor’s says, “lots of damage has been done”. This economist says that if we are willing to learn from mistakes without repeating them, something real and meaningful has been accomplished. Those bankers that have involved themselves intentionally in criminal activities will be taken care by federal authorities, but most banking institutions will seek to buy off the authorities while passing off blame to certain internal authorities as scapegoats.

Since Congress closed for vacation, the U.S. has been in a waiting frame-of-mind with little to do. Everyone is in limbo waiting for a handout instead of getting to the business of life building. There is nobody to petition or to manipulate, the favorite pastime of America. All is quiet on the western front. The war against inflation and the economic roller coaster ride isn’t over yet. We are just now breaching the top of a rather large decline. Have we learned that life is not just an intellectual pursuit?

~ E. Manning

August 13, 2008

Federal Reserve Loans Not Working

The U.S. economy has seen the Federal Reserve System bail out banking for the last 9 months with very little to show for its efforts. Commercial banks have been involved in a national interbank liquidity freeze, reluctant to lend to each other since the credit squeeze started last year. While the reason isn’t readily discussed by most venues, shady and fraudulent banking instruments designed to make money is the reason for the interbank lending crisis. Banks simply don’t want to get stuck with other banks bad debt and securities. The cancer of bad securities is touching most commercial banks profoundly. Bank capital is tied up for everyone as a result, making credit access to firms and individuals difficult.

Credit auctions continue to be overbid for amounts often doubling available credit from the Fed. There are consistently more bidding institutions than available credit funds. 64 bidders sought $54.8 billion out of 25 billion available from the Fed in a recent auction. In a new stretch, the Fed and Global Central Bankers ( G8 ) are extending limited credit for 84 days instead of the traditional 25 day credit leash.

The 84 day Fed credit wasn’t enough to meet demand, so the Fed is ramping up for another standard banking auction so that commercial bankers can continue to bolster solvency levels. Banking reputations have been thoroughly smeared as even Swiss Bankers have been involved with billions in bad securities. Bank shareholders have been hit hard because bankers went with the natural flow of high-profits banking based on securities fever. The bleeding from subprime and now prime loans continue to erode the profitability of bankers, despite the fact that bankers have the power of the fractional reserve. Unfortunately, in tough times, even the fractional reserve has a way of biting back since banks have minimum financing standards for solvency. This is currently the battle that many U.S. banks are now facing.

uneasy banking alliance?

changing balance of power

In the words of the BBC there are few winners. “The financial turmoil has proved poison for policymakers dealing with it, it has provided rare meat for economists, commentators and opposition politicians.” The cash crisis in banking has driven the growth of sovereign wealth funds, giving insurance and pension entities a place to invest more of their colossal wealth in corporate assets.

Bankers have been grateful for the huge infusion of cash (credit) from foreign powers to cover their skyrocketing losses. The reality in many cases is that bankers are literally giving up the bank to outside foreign politics in order stay operational. The balance of power in the world is changing. The Federal Reserve has had little recent effect outside of pacifier value and confidence building. ~ E. Manning

July 9, 2008

Securitized Loans and Economic Whiplash

U.S. citizens have known for years that the U.S. government is involved directly in home loans. This is done chiefly through Freddie Mac and Fannie Mae. What may have been assumed is that the government is simply involved in old-fashioned business of old-fashioned home loans, while profiting from making ordinary interest on those loans.

These “for profit agencies” were set up by the federal government with a special role. They buy large pools of mortgage loans made by banks and other lenders, attach a guarantee that the loans will be repaid and then sell securities backed by the future payments on those mortgages. The federal government of the United States supports, backs and profits from sell securities back by mortgages that these agencies purchase.

Bankers are not alone in having destroyed the economy along with adversely affecting the global economy. This is part and parcel of why the (more…)

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