Busted: Bankers and The Global Economy

January 7, 2009

Federal Reserve Declares Deep Contraction

unemployment-ads2008 ended with an economic whimper mostly because of huge and underestimated American job losses, resulting in further economic collateral damage. Retirement savings that millions have poured their souls into have lost substantial value. At the December FOMC meeting, the Fed spent a considerable amount of time mourning and recounting the flailing job market and resulting economic damage.

What has really garnered attention is their revised picture regarding economic expectations for 2009. The economic gross national product is expected to fall much more sharply in the first half of 2009 than previously anticipated by the Fed. They expect a slow recovery of GDP over the remainder of the year depending on the political stimulus “from monetary and assumed fiscal policy actions.” That is “Greek” for government intervention.

“GDP was projected to decline for 2009 as a whole and to rise at a pace slightly above the rate of potential growth in 2010.” In economics, economic growth or economic growth theory often refers to growth of potential output or production at full employment, which is caused by growth in aggregate demand or observed output. Since all the relevant figures are skewed, the Fed’s statement is pretty much meaningless as far as content, but is designed to inspire hope in the psychological realm.

wealth destruction

wealth destruction

Americans are taking a beating where their personal wealth is concerned. Interbank lending and bank lending in general remains frozen, the system continues as broken, a creation of the unprecedented greed and misuse of the economic system during the Bush administration as they cheered on the economic boom as true prosperity. Instead, the boom years of the Bush administration has proved to be a manipulation of the system for corporate and personal goals by those in power without supervision and little regulation.

The problem of transparency continues to be the single major issue in all finances across the board. However, the process of making the financial process more transparent will put someone in more control, with the potential to not only to observe and manipulate, but profit directly from the any new process of transparency. Additional transparency creates power for the administrative body that deals with transparency issues, likely creating a fascist influence. The Federal Government isn’t likely to jump at the task of dealing with the prospect of increased transparency that is being heralded. Congress has proved that they don’t really deal with the reality of money.

The process and the profit from any additional transparency will likely fall to the Federal Reserve, a corporate body with their own profit and global agenda: a brotherhood of central bankers. They have received the power so far because of the lack of discipline and direction offered by U.S. government officials, whether executive or legislative. ~ E. Manning

November 1, 2008

Economic Drain from IMF on Prime Economies

The International Monetary Fund has been bailing out emerging and secondary economies, putting prime economies like the U.S. and Britain in line to fork over more major funding. If you thought national deficits and crisis spending were enough, now prime economies have the IMF funding of lesser nations to consider. “Hundreds of millions of dollars” are needed now to support the sagging support structure of the IMF. This is relevant and an important dragging force on prime economies. If you live in the U.S. or Europe, that probably means you.

The cooling economic climate is resulting in economies across the globe taking evasive action to the degree possible, usually using the same methods employed in the United States like lowering central bank interest rates in order to sustain their banks and encourage lending. The IMF is acting as an insurance policy to shore up foundering economies. Prime Minister Gordon Brown is recommending a better insurance system to assist distressed nations, a topic that will doubtless be near the top of the Global Financial Summit in New York City this month. Financial security is now a global watch word.

Banks globally have been racing to bolster their balance sheets after a bevy of collapses and hastily arranged mergers were prompted by heavy losses from bad mortgage and financial derivatives. In the meantime, surface signs indicate a slight lessening in the immediate stability crisis as far as the current market is concerned. The U.S. government is tiptoeing quietly as the presidential election is only days away. More bad news will likely affect the election and most possibly the results. Until then, the U.S. will try to enforce an all quiet on the economic front. Will the stock markets cooperate after a banner week? Ah, there’s the rub. ~ E. Manning

October 13, 2008

Is a New Era of Economic Finance on the Way?

Britain taking charge

Britain taking charge

While many nations muddle undecisively about their part in the looming global finance crisis, Britain has increasingly taken bolder and more decisive steps in an effort to stem the tide of ruin. Now Prime Minister Gordon Brown is calling for a new financial accord to refashion banking and finance rules for the modern era. “We must now create the right new financial architecture for the global age.”

Many governments in Europe has agreed to follow Britain’s lead by recapitalizing banks and guaranteeing interbank lending. The G-8, of which Britain is a part, are in the planning stages for a meeting soon. “We must now reform the international financial system around agreed principles of transparency, integrity, responsibility, good housekeeping and co-operation across borders.”

Under the British plan, banks that are rescued with taxpayer money will be forced to cease bonuses that have encouraged excessive risk-taking in the past as well as terminating dividends to shareholders. The down side to the bank rescues is that there is currently no incentive for investment and little hope for immediate growth, both hallmarks of the “for profit” market.

While bailing out bankers will sustain the economies for the time being, the end result will be recession coupled with nasty inflation and economic stagnation in some countries if moves are not made to bolster job creation, wages and check price increases. So far, because of credit dependence, nations can expect stymied growth, triggering more defaults and a continuation of tightening lending terms. Nations have been hesitant to guarantee interbank lending because of the trust factor. The pressure is on as the global goal becomes the prevention of a global economic depression.

U.S. economic growth next year will be the weakest since 1954, with unemployment expected to rise to 8.5 percent.

Large corporations are increasingly under the economic gun. American automakers are considering mergers and General Electric is considering a bank charter to provide better funding. Bank lending remains locked down despite flooding the market with monetary credit and interest rate reductions. A continued lockdown will likely result in the depression that scrambling governments are seeking to avoid. Indications are that we are in a global vicious circle of economic decline. The alternative is breaking the cycle. Who is going to break the cycle and how?

British money manager Paul Niven remarked, “We have now entered a new era for global banking. In return for taxpayers’ money, the state will gain a level of control over their governance, pay, and lending practices.” Is Niven’s statement a reality or the work of wishful fiction?

Could the world have the beginnings of a new global banking order or is this move simply an action involving separate economic nationalization of banking and finance to preserve the current financial structure? Perhaps we will know once clearer heads rule the roost. Bible prophecy indicates a new global system that portends to usher in a new era of security. Is there any stock to that? What say you? ~ E. Manning

October 3, 2008

E.U. Panic: the Edge of the Abyss

Interbank lending, credit to businesses and individuals have seized up. Central banks have injected billions of dollars to maintain some flow of funds, endangering the stability of the dollar.

French Prime Minister Francois Fillon is hosting an emergency summit with Italian, British and German leaders on October 4. Fillon claims that only collective action are capable of solving the financial crisis facing the European Union. He said he would not rule out any solution to stop the failure of the banking system.

Lax regulation and excessive lending have to a global debacle placing the world “on the edge of the abyss because of an irresponsible system,” according to the French Minister.

Finance Ministers in Europe will be working on proposals at the emergency meeting to unfreeze credit while coordinating economic and monetary strategies. While the U.S. has been focused on a massive bailout plan, the British government has been panicking in an effort to bolster their financial system. Bad news isn’t limited to the U.S. economy, now residing in the E.U. financial sector.

Ireland has offered guarantees on bank deposits, prompting a flight of capital from British lenders to Irish banks. Insurance giant Fortis has been broken up and nationalized to sustain it since no corporate rescuers were available. Swiss UBS has been plastered by its exposure to subprime debt. The banking and investment industry in Europe is shedding jobs. Meanwhile, turmoil over Ireland’s guarantees threatens the stability of the rest of Union according to many banking officials.

The U.S. economy has become thoroughly dependant on foreign investment. With much of the world is financial disarray, who will invest in America? According to authors of the American bailout plan, the plan is largely dependent on foreign investors to insure the success for the future. Otherwise, U.S. success in preventing a protracted deep recession is truly a wild card. ~ E. Manning

September 3, 2008

A New Banking Crisis for Britain and Europe?

British bankers have began to hoarde their reserves and have become reluctant to engage in the usual interbank lending process that commercial banking enjoys daily. The resulting freeze in liquidity and tightening of credit that will shortly result is reminiscent of the reaction of U.S. bankers during the initial stages of the U.S. mortgage and credit crisis before the Federal Reserve Auction was created.

Apparently, the pressure from bad securitized mortgage bonds continues to rack the United Kingdom bankers. As a result fearful bankers simply shut down the process of usual banking trust, freezing the free exchange of capital that the modern world has grown accustomed to.

In April, the Bank of England offered to take on shaky mortgage-backed bonds in an effort to liquify the frozen banking system. This effort has not worked. Bankers are instead working to prop up their own internal banking instead of dealing with the larger marketplace, another reaction similar to U.S. bankers.

The liquidity freeze points to the distinct possibility of more banking failures in the UK similar to Northern Rock, in which the British government nationalized the debt. Lack of confidence is once again becoming the buzz word in British banking as fears mount. Fears in the commercial banking community are showing their reflections once again as a global financial slowdown or recession looms. ~ E. Manning

August 23, 2008

Economic Gale Force Winds Blow in the States

Another Friday passed with the closing of The Columbian Bank and Trust of Topeka, Kansas. Ben Bernanke is speaking in an amazing feat of poetry, comparing the economic storm in the United States to gale force winds that have not subsided. This is an almost startling admission from a man so conservative in his explanations. Bernanke is feeling confident about his strength and position.

The appearance of the economy has weathered well so far without truly significant collateral damage for the public to see. Bernanke admits to being challenged with the “softening in economic activity and rising unemployment.” He readily admits that commodities boom is partly responsible for the dramatic rise in inflation instead of simply blaming inflation on energy futures.

The Fed is weathering the gale force storm by hanging tough and hoping for stability. Even “the experts” admit that the inflation outlook is uncertain, but will be a major concern through next year. If the Fed could find a way to control commodity prices, they would probably think they had it made. Bernanke hasn’t devised a way to harness the commodities market yet. Undoubtedly, that is in the works soon.

The Fed continues to work with other central bankers to provide plenty of liquidity for needy banking institutions that are still fearful of interbank lending. Banks continue to use Fed auctions liberally, with demand in excess of supply.

Bernanke admits the need to somehow strengthen the financial system beyond the sustenance that has already been provided. Suddenly, Bernanke is speaking about thorny issues “raised by the existence of financial institutions that may be perceived as ‘too big to fail’ and the moral hazard issues that may arise when governments intervene in a financial crisis.” In other words, Bernanke is expecting some large financial failures. Whether he is alluding to Fannie Mae and Freddie Mac or holding banks like Citi isn’t being admitted. He is sounding warning by his comments as the gale force winds blow. He also defended the need to cover for Bear Stearns almost six months ago. He apparently expects to do so again.

Bernanke has also admitted that the Fed is involved in finding a way to protect bankers from their own financial politics through automation and standards rather than avoiding the risk altogether. In other words, the Fed is seeking to minimize risk by continuing to engage in what has been discovered to be risky banking conduct. Hey, it’s good for business.

Bernanke even discusses covering pools of securitized bonds while seeking more power from Congress to settle a crisis without government intervention. That is good for the Fed’s business as well as the corporate oligarchy takes ever more responsibility for monetary policy and legal oversight from the hands of government. That is the idea in the eyes of the Fed.

Bernanke believes that the more power that the Fed has, the less risk that there is to the system. He is convinced that by having more regulatory power to monitor individual institutions, he can eliminate moral hazard and promote financial resistance, perhaps by increasing capital requirements for banking. He wants to conduct “stress tests” to monitor liquidity, risk exposure and adverse circumstances. He wants to build a new financial regulatory empire operated by corporate global banking. Who is watching the Federal Reserve while all this wonderment is going on? Not a soul is watching the Fed. The Fed monitors itself and as far as the government and Congress are concerned, is “above reproach.”

The reality is that politicians have become thoroughly dependent on the International Society of Bankers. Fear should be firmed rooted in the hearts of politicians. World bankers have the nation of sheep by the private parts and are leading it down the primrose path of banking for sheering.

~ 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

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