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Rodius

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Banking Systems
« on: October 04, 2022, 03:50:33 AM »
It is looking bad for very large banks....

Credit Suise
https://www.reuters.com/business/finance/credit-suisse-fall-around-10-early-trading-2022-10-03/

Deutsche Bank and Bank of England
https://smallcaps.com.au/cracks-appear-financial-system-bank-of-england-credit-suisse-deutsche-bank/

Given these three banks make Lehman look mediocre, and all three are in trouble, and any one of them collapsing would equal, at best, when happened in 2008, I think this is worth watching for the next few months.

El Cid

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Re: Banking Systems
« Reply #1 on: October 04, 2022, 07:38:07 AM »
Once a banking crisis happens, it is very unlikely that another new, huge one happens for many years because after the crisis very strong regulations are put in place. After 2008 extremely big capital requirements were implemented and banks were forced to become much more risk-averse

It is very unlikely that another major banking crisis happens so close to 2008. After 1929-33, banks became boring investments and represented no real danger for many decades...The same is true today as well

Rodius

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Re: Banking Systems
« Reply #2 on: October 04, 2022, 08:00:45 AM »
Once a banking crisis happens, it is very unlikely that another new, huge one happens for many years because after the crisis very strong regulations are put in place. After 2008 extremely big capital requirements were implemented and banks were forced to become much more risk-averse

It is very unlikely that another major banking crisis happens so close to 2008. After 1929-33, banks became boring investments and represented no real danger for many decades...The same is true today as well

I would love to agree with you.
Sadly, I keep half an eye on this topic, and since 2008, all that is happened is a shifting of the rules and a continuation of corrupt practices.

In short, banking knows that if they are big enough, then the Govt will save them.
I wish they would just let them fail and get rid of the bad apples.

phelan

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Re: Banking Systems
« Reply #3 on: October 04, 2022, 04:01:20 PM »
Thanks for starting this thread Rodius.  I've been thinking about starting a similar thread as well, seems things are getting really dicey in the finance world.

I do think that there are great systemic risks in the financial world right now.  The 2008 crash did not result in the kind of regulations needed to keep a big crash from happening, it was more of a situation where the can was kicked down the road, and now in the wake of the financial moves made to get through the pandemic, the can is getting too big to kick. 

I do think one of the unregulated risks, or perhaps regulated but unremedied risks, in the market today is the massive naked shorting of financial instruments by not just banks, but hedge funds, market makers, and others that bleeds into pension funds and other entities.  The games played with short investments are more than just investment hedging, it's used as a tool to force companies, currencies, etc. into failure - and also potentially as a means of economic warfare.  There are even rumors that the recent divorces of Bill Gates and Jeff Bezos can be traced back to short bets gone bad, and their divorce was at least partially a tool to separate out and protect some of the good assets from the bad assets/bets going bad.  Who knows at this point? 

All that to say, I'm watching finance news with interest.  I really think we are going to start seeing some dominoes fall in the world of finance that will have wide-ranging repercussions.

Finally, to throw some meat in this thread that isn't just my opinion, I'm fascinated by and curious about the recent move Pope Francis made to force all Vatican funds to be managed solely by the Vatican Bank.  The deadline for this was September 30.  Notice a big chunk of Vatican investments were with Credit Suisse.  One of those things that makes you go hmm...

https://www.catholicnewsagency.com/news/252093/pope-francis-instructs-vatican-entities-to-move-all-funds-to-vatican-bank-by-sept-30

Quote
Pope Francis has ordered that the Holy See and connected entities move all financial assets to the Institute for Works of Religion (IOR), commonly known as the Vatican bank.

The pope’s rescript, issued Aug. 23, clarifies the interpretation of a paragraph in the new constitution of the Roman Curia, Praedicate Evangelium, promulgated in March.

According to Francis’ rescript, financial and liquid assets held in banks other than the IOR must be moved to the Vatican bank within 30 days of Sept. 1, 2022.

...

The decree will force Holy See institutions, including the Secretariat of State, to move their financial assets to the IOR by the end of September. The Secretariat of State is known to have had accounts in Swiss financial institutions, including Credit Suisse, through which the controversial London building investment was initially carried out.
« Last Edit: October 04, 2022, 04:07:05 PM by phelan »

Richard Rathbone

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Re: Banking Systems
« Reply #4 on: October 04, 2022, 05:08:45 PM »
It is looking bad for very large banks....

Credit Suise
https://www.reuters.com/business/finance/credit-suisse-fall-around-10-early-trading-2022-10-03/

Deutsche Bank and Bank of England
https://smallcaps.com.au/cracks-appear-financial-system-bank-of-england-credit-suisse-deutsche-bank/

Given these three banks make Lehman look mediocre, and all three are in trouble, and any one of them collapsing would equal, at best, when happened in 2008, I think this is worth watching for the next few months.

The Bank of England isn't in trouble, British Pension Funds are, and its bailing them out. The Funds are in trouble because the way the government regulates them forces them to be vulnerable to swings in gilt prices and Truss et al didn't bother to check whether such vulnerabilities existed before spooking the markets. (or worse they followed the self-serving advice of those of their donors who did appreciate the vulnerability, and have made fortunes in recent days from it being followed) This has allowed a bunch of hedge funds to make a mint at the expense of those who are due to retire in the next few years and if the BoE hadn't acted it would have led to existing pensioners having their pensions wiped out too in order to fund the chancellors champagne parties with his hedge fund friends.

This government is doing a reverse Healey and squeezing the poor till the pips squeak. Its doing a reverse Brown, and fiddling with pensions to get more money for its donors rather than more money for the government. A Tory doing the reverse of Labour chancellors isn't that surprising, but they are being really extreme about it.

phelan

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Re: Banking Systems
« Reply #5 on: October 04, 2022, 08:27:59 PM »
More on Credit Suisse here...

https://wallstreetonparade.com/2022/10/credit-suisse-and-the-feds-plunge-protection-team/

Quote
The 5-year CDS of Credit Suisse has spiked from a reading of 55 basis points in January to an historic intraday high of more than 350 basis points on Monday. The price of a Credit Default Swap reflects the cost of insuring oneself against a debt default by the bank. Who would be stampeding into the CDS of Credit Suisse and driving up the cost of protection? The mega banks on Wall Street that are counterparties to its derivative trades come to mind, as well as hedge fund speculators.

Credit Suisse is Switzerland’s second largest bank, after UBS. It is also a major trading house on Wall Street and a derivatives counterparty to other global banks. Its  shares tumbled to an intraday historic low on Monday before closing up in New York, but still at the single-digit price of $4.01. The shares of Credit Suisse have lost 58 percent of their value year-to-date, based on yesterday’s closing price – far worse than its peer global banks.

...

The panic around Credit Suisse has been growing as its share price dived this year and last after the bank suffered over $5 billion in losses from its tricked-up derivatives with the family office hedge fund, Archegos Capital Management. Archegos went belly up in March of last year. Credit Suisse’s reputation took another hit from its involvement in the Greensill Capital scandal. Then, of course, there was the infamous spy-gate scandal in 2019 where the bank spied on and followed various employees. (You can’t make this stuff up.)

oren

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Re: Banking Systems
« Reply #6 on: October 05, 2022, 12:15:55 AM »
Quote
I do think that there are great systemic risks in the financial world right now.  The 2008 crash did not result in the kind of regulations needed to keep a big crash from happening, it was more of a situation where the can was kicked down the road, and now in the wake of the financial moves made to get through the pandemic, the can is getting too big to kick. 
Very true.

zenith

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Re: Banking Systems
« Reply #7 on: October 06, 2022, 08:14:03 PM »
The Lost Science of Money: The Mythology of Money, the Story of Power
by Stephen A. Zarlenga
https://www.goodreads.com/en/book/show/1992942.The_Lost_Science_of_Money

Debt: The First 5,000 Years
by David Graeber
https://www.goodreads.com/book/show/6617037-debt

Michael Hudson: Oligarchy will never cancel the debt
Where is reality? Can you show it to me? - Heinz von Foerster

johnm33

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Re: Banking Systems
« Reply #8 on: October 07, 2022, 12:27:44 AM »
When you take out a loan the bank will demand collateral, usually at a discount, let's use a mortgage as an example. You get the 'loan' 'money' created out of thin air at the stroke of a pen or pressed on a keyboard, the bank gets the deeds which it can use as a security for a loan at a much lower interest rate from it's CB, it also gets your signed note that you agreed to pay it back on it's terms with interest, it can sell that income stream to a pension fund plus the 'money' that appeared in your account is also in it's possession though it may move to another bank and be in theirs but on average it will recieve a similar amount back from that bank doing the same type of business. Then of course since the chances are that you bought an existing property, 1/3 of which will be technically owned by the banks due to outstanding mortgages that whole portfolio will inflate in value by the amount you borrowed/3. Now it will be able to lend out the money you signed into being together with the cash it recieved from the CB and the cash it recieved from selling the income stream, and with the fractional reserve system be able to lend about 90% of it out 9 times.

phelan

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Re: Banking Systems
« Reply #9 on: October 07, 2022, 01:26:34 AM »
When Choosing Counterparties, Banks Tend to Pick Riskier Ones
https://www.financialresearch.gov/the-ofr-blog/2022/09/29/when-choosing-counterparties-banks-tend-to-pick-riskier-ones/

Quote
In a recent working paper analyzing who banks chose as counterparties in the over-the-counter (OTC) derivatives market, the authors found that banks are more likely to choose riskier nonbank counterparties that are already heavily connected and exposed to other banks, which leads to an even more densely connected network. Furthermore, banks do not hedge these exposures, but rather increase them by selling rather than purchasing credit derivative swaps against these counterparties. Finally, the authors found that common counterparty exposures are correlated with systemic risk measures despite greater regulatory oversight following the 2008 financial crisis.

What are the primary conclusions?

The authors looked at risk-taking by banks as demonstrated by choice of their nonbank counterparties. The analysis focused on how these choices in the OTC derivative markets contribute to network fragility. The authors found:

 1.  Systemically important banks have a greater propensity to choose counterparties with a higher degree of existing connections to other systemically important banks. In densely connected networks, banks are more likely to connect with risky counterparties for their most material exposures. Moreover, the results are resilient to alternative explanations related to counterparty demand factors and changes in the regulatory environment.
   
2.  While banks could hedge their credit risk exposures to interconnected counterparties, mitigating the potential impact, if these counterparties were to fail, they often do not. In fact, they double-down on these exposures by selling insurance against those counterparties. This behavior is most pronounced in riskier counterparties.

3.  Regulatory reforms, such as uncleared margin rules and mandatory clearing, were designed to reduce risk by mitigating the build-up of dense interconnections and systemic feedback. The paper shows that the density of financial market networks has actually increased following the adoption of these reforms in the bilateral derivatives markets. Moreover, interconnectedness due to shared counterparty exposures has a significant association with systemic risk measures in the post-crisis period.

What are the financial stability implications?

The question about counterparty choice is central to our understanding of the financial system’s resilience to contagion. The impact of adverse external shocks may be amplified for networks already weakened by riskier connections. Additionally, a system may come under pressure from a network-intrinsic risk rather than an exogenous shock and counterparty risk is one way this could happen.

Network connections and choice of counterparties is especially important in the derivative markets. Uncleared derivatives account for approximately half of all derivative activities by banks, making them a significant fraction of their trading operations overall. Half of these are represented by nonbank counterparties with multiple bank dealers. Losses on uncleared derivatives are fully borne by the bank, whereas losses for cleared derivatives are mutualized across member firms of the clearinghouse.


Richard Rathbone

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Re: Banking Systems
« Reply #10 on: October 07, 2022, 02:37:23 AM »

Debt: The First 5,000 Years
by David Graeber
https://www.goodreads.com/book/show/6617037-debt


Have you read Debt? I've read a couple of other books by Graeber recently and was wondering about getting that one too.

Alexander555

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Re: Banking Systems
« Reply #11 on: October 07, 2022, 04:38:50 AM »
Once a banking crisis happens, it is very unlikely that another new, huge one happens for many years because after the crisis very strong regulations are put in place. After 2008 extremely big capital requirements were implemented and banks were forced to become much more risk-averse

It is very unlikely that another major banking crisis happens so close to 2008. After 1929-33, banks became boring investments and represented no real danger for many decades...The same is true today as well

Plenty of debt is created since 2008.  No sure how big the size of that pile has become for the private sector, because of that low interest rate. In some cases even a negative interest rate. But you can be sure it's big. The same for governments, with the help of negative interest rates and central banks expanding their balance sheets.

zenith

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Re: Banking Systems
« Reply #12 on: October 07, 2022, 04:53:44 AM »

Debt: The First 5,000 Years
by David Graeber
https://www.goodreads.com/book/show/6617037-debt


Have you read Debt? I've read a couple of other books by Graeber recently and was wondering about getting that one too.
i read it about a decade ago.
debt: a psychological house of mirrors.
« Last Edit: October 07, 2022, 07:15:49 PM by zenith »
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El Cid

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Re: Banking Systems
« Reply #13 on: October 07, 2022, 07:58:37 AM »
There are huge misunderstandings and generalizations about the financial system, banks, central banks, money, etc. which is evident from this thread.

For example (but I could pick many things from upthread) here you show Fed liabilities which are the results of QE and can simply be called "money printing". This is not really debt. The Fed electronically printed money to buy (mostly) government bonds from banks to push down government bond yields and revive the economy via various channels (interest rate channel, portfolio balance channel, etc). If you look at it from a consolidated point of view, where the Fed is part of the US government (which in reality it is despite claims by many contrary to it), the US government reduced its government debt by printing money. They printed money and bought back gov't debt. That is what happened.

By the way, US household debt has been trending down since 2008, so it is not rising at all, as shown on the chart. What has happened is that gross government debt rose, but private debt went down, and net government debt (excluding bonds held by the Fed) did not go up either!

I think these processes are significantly more complicated than the generalizations told about them everywhere

sidd

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Re: Banking Systems
« Reply #14 on: October 07, 2022, 08:17:55 AM »
Re: Graeber "Debt: The first 5000 years"

I have read it. I recommend it.

sidd


zenith

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Re: Banking Systems
« Reply #15 on: October 07, 2022, 07:26:56 PM »
There are huge misunderstandings and generalizations about the financial system, banks, central banks, money, etc. which is evident from this thread.

prof. steve keen has been banging that drum for years.
https://www.goodreads.com/en/book/show/10303367-debunking-economics

i haven't read his book but i enjoy his, and mark blyths', talks.
i read the back and forth between keen and paul krugman as well, that was fun. he also has one of the most frightening presentations (15 minutes) on youtube relating to economists and climate change.
Where is reality? Can you show it to me? - Heinz von Foerster

Alexander555

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Re: Banking Systems
« Reply #16 on: October 07, 2022, 07:28:57 PM »
There are huge misunderstandings and generalizations about the financial system, banks, central banks, money, etc. which is evident from this thread.

For example (but I could pick many things from upthread) here you show Fed liabilities which are the results of QE and can simply be called "money printing". This is not really debt. The Fed electronically printed money to buy (mostly) government bonds from banks to push down government bond yields and revive the economy via various channels (interest rate channel, portfolio balance channel, etc). If you look at it from a consolidated point of view, where the Fed is part of the US government (which in reality it is despite claims by many contrary to it), the US government reduced its government debt by printing money. They printed money and bought back gov't debt. That is what happened.

By the way, US household debt has been trending down since 2008, so it is not rising at all, as shown on the chart. What has happened is that gross government debt rose, but private debt went down, and net government debt (excluding bonds held by the Fed) did not go up either!

I think these processes are significantly more complicated than the generalizations told about them everywhere

That household debt to gdp tells us nothing. And espesially not in the US. Because of that financial sector. That inflates your gdp number in a big way. And even over here in Belgium they manipulate the number. Every year they add something new to the gdp number, like research and development, or drug trade...... And they extrapolate the result to the past. And that makes the gdp number bigger. But nothing changed in reality. It  keeps the debt to gdp ratio lower.  Belief me, when you make money for free, they will take it.

johnm33

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Re: Banking Systems
« Reply #17 on: October 07, 2022, 10:07:13 PM »
Steve Keen, nothing speaks to me like accurate predictions, especially when they're non binary.
http://www.debtdeflation.com/blogs/2009/07/15/no-one-saw-this-coming-balderdash/

Alexander555

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Re: Banking Systems
« Reply #18 on: October 16, 2022, 12:57:53 PM »
And it looks like many people don't realise that plenty of money creation will come from interest payments in the future. Plenty money is created by the use of debt with a very low interest rate. At zero % it does'nt matter how much debt you create. But now the tide is turning. And most governments have already large budget deficits. Lets assume the average portfolio has a duration of 7 years. So they get the higher interest rate on the new debt. Plus the higher interest rate on 1/7  of the current portfolio you have to refinance. So even if they would manage to halt money creation with a healty budget. There will still be plenty money creation because of the interest payments on that giant pile of debt. So probably we will first get both. Large budget deficits with larger and larger interest payments. And rampant inflation. Nobody will care about growth anymore because they will get more and more poor by inflation. Part of the solution will be a healty budget , and all debt will be gone. So basically all financial assets are at risk. If you are a pensionfund, and you have no gold, you are close to doomed.

Alexander555

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Re: Banking Systems
« Reply #19 on: October 16, 2022, 08:08:29 PM »
Like you can see , there are almost no countries with a government budget in balance. They all have large deficits. That means there will be plenty money creation in the near future . Most of that money creation in the past was to create jobs, to pull people out of poverty.... But now it's destroying jobs, pushing people into poverty. Because of inflation. And not only in poor countries. Operation damage control will start soon. The fight against money creation. https://tradingeconomics.com/matrix

The Walrus

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Re: Banking Systems
« Reply #20 on: October 17, 2022, 04:10:30 PM »
There are huge misunderstandings and generalizations about the financial system, banks, central banks, money, etc. which is evident from this thread.

For example (but I could pick many things from upthread) here you show Fed liabilities which are the results of QE and can simply be called "money printing". This is not really debt. The Fed electronically printed money to buy (mostly) government bonds from banks to push down government bond yields and revive the economy via various channels (interest rate channel, portfolio balance channel, etc). If you look at it from a consolidated point of view, where the Fed is part of the US government (which in reality it is despite claims by many contrary to it), the US government reduced its government debt by printing money. They printed money and bought back gov't debt. That is what happened.

By the way, US household debt has been trending down since 2008, so it is not rising at all, as shown on the chart. What has happened is that gross government debt rose, but private debt went down, and net government debt (excluding bonds held by the Fed) did not go up either!

I think these processes are significantly more complicated than the generalizations told about them everywhere

If you at the combined (private + government) debt, it did not change appreciably during the decade between the 2008-9 recession and covid.


Alexander555

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Re: Banking Systems
« Reply #21 on: October 18, 2022, 08:23:02 PM »
What will happen with the money velocity in the future ? It has been going lower and lower for a long time. Together with inflation going lower and lower. One thing you could say about inflation is that it forces you to spend that money. Instead of placing it on a savingsaccount. This could become the story of the tube of toothpaste and inflation. Inflation is like toothpaste, once out of the tube, it's hard to get it back in. And inflation is kicking in on a global scale. Everywhere you start to see protest for higher wages. And if money velocity starts to rise, many will get it. It's going to be interesting. https://m.investing.com/analysis/watch-out-the-coming-rise-in-money-velocity-200626430

zenith

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Re: Banking Systems
« Reply #22 on: November 12, 2022, 03:06:45 AM »
I Used To Be Disgusted, Now I'm Disabused
http://charleshughsmith.blogspot.com/2022/11/i-used-to-be-disgusted-now-im-disabused.html

"Concentrating any form of capital, production and power renders the system vulnerable to collapse due to the inherent weaknesses generated by replacing complex networks with vertical-integration under the control of a few cartels, monopolies, autocrats, gatekeepers or regulators--the latter two being easily influenced by political pressure and/or private gain.

It's certainly possible to be disgusted, but being disabused of the fantasy that the system is self-correcting is the healthier perspective. Everything is forever until systemic weaknesses reveal themselves, typically at the most inopportune junctures."
Where is reality? Can you show it to me? - Heinz von Foerster

zenith

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Re: Banking Systems
« Reply #23 on: December 20, 2022, 04:51:14 PM »
Global economic crisis & the geopolitical reaction w/Jeffrey Sachs (Live)
Where is reality? Can you show it to me? - Heinz von Foerster

Alexander555

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Re: Banking Systems
« Reply #24 on: December 23, 2022, 10:13:00 PM »
The Nasdaq lost 7,4 trillion this year. Most other stockmarkets also accumulated heavy losses. Bond prices are down because of rising interest rates. Many people want be happy early next year when they find out how big the losses are. https://www.cnbc.com/2022/11/25/techs-reality-check-how-the-industry-lost-7point4-trillion-in-one-year.html

zenith

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Re: Banking Systems
« Reply #25 on: December 23, 2022, 10:18:37 PM »
“We are in a debt trap” - Nouriel Roubini on 10 ‘megathreats’ to our world and how to stop them
Where is reality? Can you show it to me? - Heinz von Foerster

johnm33

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Re: Banking Systems
« Reply #26 on: December 24, 2022, 10:45:02 AM »
The question asked at 3min is the begining of the obfuscation, the answer should be that apart from China and Iran no government has the power to create it's own 'money' all other governments borrow money created out of thin air, which is the essential right of soveriegn power, from 'their' central bank. The ownership, control and beneficiaries of which is subject to multiple layers of deceit. Russias central bank, for instance, sent 600 tons of gold to it's owners at the beggining of the smo to settle it's interest debt to them.
 forgot North Korea is and until recently Libya was a soveriegn power too
« Last Edit: December 24, 2022, 03:13:07 PM by johnm33 »

trm1958

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Re: Banking Systems
« Reply #27 on: December 24, 2022, 02:44:22 PM »
I didn't know those two were exceptions!

The Walrus

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Re: Banking Systems
« Reply #28 on: December 24, 2022, 06:04:51 PM »
The Nasdaq lost 7,4 trillion this year. Most other stockmarkets also accumulated heavy losses. Bond prices are down because of rising interest rates. Many people want be happy early next year when they find out how big the losses are. https://www.cnbc.com/2022/11/25/techs-reality-check-how-the-industry-lost-7point4-trillion-in-one-year.html

Still not as bad as 2008.

https://www.forbes.com/advisor/investing/stock-market-performance/

zenith

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Re: Banking Systems
« Reply #29 on: December 24, 2022, 11:38:13 PM »
The question asked at 3min is the begining of the obfuscation, the answer should be that apart from China and Iran no government has the power to create it's own 'money' all other governments borrow money created out of thin air, which is the essential right of soveriegn power, from 'their' central bank. The ownership, control and beneficiaries of which is subject to multiple layers of deceit. Russias central bank, for instance, sent 600 tons of gold to it's owners at the beggining of the smo to settle it's interest debt to them.
 forgot North Korea is and until recently Libya was a soveriegn power too

the bank of canada is still a national institution though it's not used as it was historically used to build the country. these days it's a member of the bank for international settlements and loans to governments are borrowed from the privately owned banks.

sovereignty is an old fashioned concept as everything is intertwined, that was the unipolar world order that's coming unglued at least.

money itself is conjured from nothing so we're way deep into abstraction. 
Where is reality? Can you show it to me? - Heinz von Foerster

Alexander555

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Re: Banking Systems
« Reply #30 on: December 25, 2022, 05:52:54 AM »
This will become the true hell for the banking system, El Niño. https://www.wired.com/story/climate-environment-hurricane

johnm33

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Re: Banking Systems
« Reply #31 on: December 25, 2022, 11:27:43 AM »
"bank of Canada" IIRC Canada's soveriegnty, as far as money creation goes, was surrendered in '75 look at the national debt in the years before that compared to present, I haven't, but it should show a shocking difference.
Handing over that power to bankers is literally giving them a licence to print money but on a massive scale. Once that step is taken they will begin to improve their situation incrementally and before too long they will own everything, the law, the legislature, pharma, all industry, the land everyones mortgage but it will never be enough and they will squeeze and warp the system until it breaks, in their attempts to improve their 'lot'.

trm1958

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Re: Banking Systems
« Reply #32 on: December 25, 2022, 03:01:31 PM »
How long do you think that will take, johnm33?

johnm33

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Re: Banking Systems
« Reply #33 on: December 25, 2022, 06:36:39 PM »
How long do you think that will take, johnm33?
Wrong tense, who do you think all the debt is owed to? I'm guessing that if they had the power and sufficient allies they'd tell the rest of us to vacate their property.

SteveMDFP

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Re: Banking Systems
« Reply #34 on: December 25, 2022, 10:20:13 PM »
"bank of Canada" IIRC Canada's soveriegnty, as far as money creation goes, was surrendered in '75 look at the national debt in the years before that compared to present, I haven't, but it should show a shocking difference.
Handing over that power to bankers is literally giving them a licence to print money but on a massive scale. Once that step is taken they will begin to improve their situation incrementally and before too long they will own everything, the law, the legislature, pharma, all industry, the land everyones mortgage but it will never be enough and they will squeeze and warp the system until it breaks, in their attempts to improve their 'lot'.

I think it's wrong to lump the central bankers along with the capitalist commercial bankers.  Absent rank corruption, the central bankers only earn their salary.  At least in the US, they're salaried employees, with no fat bonuses.  The US Federal Reserve does make a significant annual surplus, but the surplus just gets handed off to the Treasury.  They "print money" to buy securities, and when they sell securities, the sales typically gets accounted as a surplus, with that money going to the Treasury.  The Fed is essentially a non-profit organization.

But they are bankers by profession, so it seems plausible to me that their instinctive biases may tend to align with the commercial, for-profit, bankers.  But I have no evidence to provide on this question.

Personally, I prefer dealing with non-profits whenever possible.  So I do all my banking with credit unions.  In the US, these are also non-profits, so they don't try to squeeze their customers with high fees or above-market rates on loans.

sidd

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Re: Banking Systems
« Reply #35 on: December 25, 2022, 10:46:38 PM »
Re:  no evidence to provide

Two obvious examples are greenspan knifing brooksley born on derivative trading and Fed bailout of banks in 2008 while putting 10 million families on the street.

sidd

El Cid

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Re: Banking Systems
« Reply #36 on: December 26, 2022, 09:07:09 AM »
BTW, after 2008 banks were very heavily regulated globally just like after 1929-33. No surprise the US bank index of bank stocks is no higher than at the 2007 high despite 15 years having passed (ie. very much lower in real terms), and European bank stocks are likewise much lower than during their heyday. The reason is that regulations, increased capital buffers, etc. seriously curtailed their ability to make profits. They need to hold much-much more capital than they used to, and this makes them much safer and much less profitable. Most european banks trade below book value which means that they can not even be profitable enough to cover their cost of capital.

As for central bank actions, they did bail out banks in 2007-9 because without the bailout our whole economic system would have collapsed like in 1931-33 and you would have had not 10 but 50 million unemployed. Since 2010 QE programs by C.Banks were NOT to support commercial banks but to reduce government (and thereby household and corporate) borrowing costs and therby increase the growth rate of the economy

johnm33

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Re: Banking Systems
« Reply #37 on: February 03, 2023, 12:08:36 PM »
https://truthtalk.uk/2023/where-all-conspiracies-begin-and-end-the-banking-system-creating-money-out-of-thin-air-the-reality-of-the-banking-system/
well worth the read/viewing
Quote
In reality, banks are creators of the money supply. They create money out of thin air. Most people think of banks as deposit taking institutions that lend money but the legal reality is that this is false. A deposit is not a bailment and is not held in custody. Legally, when you put money in the bank, it is not a deposit but simply a loan to the bank. The banks borrow from you the general public.

Banks don’t lend money either. Instead they purchase securities. If you sign a loan or mortgage contract with the bank you issue a security, namely a promissory note and the bank purchases that.

This is very different to what the banks present to the public.
It's important to note that when you loan money to the bank you join the list of creditors at the very bottom of the food chain.

johnm33

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Re: Banking Systems
« Reply #38 on: February 03, 2023, 01:21:54 PM »
Quote
As for central bank actions, they did bail out banks in 2007-9 because without the bailout our whole economic system would have collapsed like in 1931-33 and you would have had not 10 but 50 million unemployed. Since 2010 QE programs by C.Banks were NOT to support commercial banks but to reduce government (and thereby household and corporate) borrowing costs and therby increase the growth rate of the economy
What QE amounted to was buying the betting slips of punters where the race had been run and lost for the full value of the 'lost' stake. I guess the hope was that with sufficient new 'money' chasing those assets that they would be inflate to the point where they were made whole. Quite prescient, so much so that it's hard to believe it wasn't gamed beforehand.

SteveMDFP

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Re: Banking Systems
« Reply #39 on: February 03, 2023, 01:56:56 PM »
It's important to note that when you loan money to the bank you join the list of creditors at the very bottom of the food chain.

No, for two reasons.  First, if a firm goes bankrupt, creditors all get paid before shareholders receive a penny.  Second, bank deposits (at least in the US) are insured with a Federal agency.  Depositing money with a bank (or credit union) is about the safest place to put money.

El Cid

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Re: Banking Systems
« Reply #40 on: February 03, 2023, 03:31:07 PM »

 What QE amounted to was buying the betting slips of punters where the race had been run and lost for the full value of the 'lost' stake. I guess the hope was that with sufficient new 'money' chasing those assets that they would be inflate to the point where they were made whole. Quite prescient, so much so that it's hard to believe it wasn't gamed beforehand.

Actually no. In most countries, governments/central banks did NOT lose money on the bailouts because most of the invested sums were later recuperated. some governmetns even mad a small profit.

"TARP recovered $441.7 billion from $426.4 billion invested, earning a $15.3 billion profit or an annualized rate of return of 0.6%, and perhaps a loss when adjusted for inflation"
https://www.wsj.com/articles/ally-financial-exits-tarp-as-treasury-sells-remaining-stake-1419000430

 

El Cid

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Re: Banking Systems
« Reply #41 on: February 03, 2023, 03:34:20 PM »
It's important to note that when you loan money to the bank you join the list of creditors at the very bottom of the food chain.

No, for two reasons.  First, if a firm goes bankrupt, creditors all get paid before shareholders receive a penny.  Second, bank deposits (at least in the US) are insured with a Federal agency.  Depositing money with a bank (or credit union) is about the safest place to put money.

Actually john is dead right on this. When you open an account at a bank, you lend money to the bank, you become a creditor. When a bank goes bankrupt there is usually no money left for creditors (because banks are quite leveraged though not nearly as much as they used to). If your account balance is less than the amount of deposit insurance (100 000 euros in the EU) you can sleep well, anything above that amount is likely going to be lost in a bankruptcy. That is exactly why central bank digital currencies would make sense: no chance of losing yout money in a bankruptcy.

johnm33

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Re: Banking Systems
« Reply #42 on: February 03, 2023, 06:29:26 PM »
Quote
Actually no. In most countries, governments/central banks did NOT lose money on the bailouts because most of the invested sums were later recuperated. some governmetns even mad a small profit.
The re-inflated assets were mainly sold off to some mug of a pension fund manager, and now the system can be comfortably deflated without the bankers suffering, so it's all good.

El Cid

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Re: Banking Systems
« Reply #43 on: February 03, 2023, 09:29:36 PM »
The point is that usually when governments have to step in - and this is the case during most crises - assets prices are low enough and the government usually does not lose, or even makes some money by bailing out systemic institutions . This was the case eg. during the 1998 Hong Kong Crisis when the HKMA bought up stocks and sold them for a tidy profits some years later. Many more examples like this all around the globe

Alexander555

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Re: Banking Systems
« Reply #44 on: February 04, 2023, 06:44:43 AM »

johnm33

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Re: Banking Systems
« Reply #45 on: February 04, 2023, 12:05:22 PM »
The question asked at 3min is the begining of the obfuscation, the answer should be that apart from China and Iran no government has the power to create it's own 'money' all other governments borrow money created out of thin air, which is the essential right of soveriegn power, from 'their' central bank. The ownership, control and beneficiaries of which is subject to multiple layers of deceit. Russias central bank, for instance, sent 600 tons of gold to it's owners at the beggining of the smo to settle it's interest debt to them.
 forgot North Korea is and until recently Libya was a soveriegn power too

the bank of canada is still a national institution though it's not used as it was historically used to build the country. these days it's a member of the bank for international settlements and loans to governments are borrowed from the privately owned banks.

sovereignty is an old fashioned concept as everything is intertwined, that was the unipolar world order that's coming unglued at least.

money itself is conjured from nothing so we're way deep into abstraction.

One advantage a sovereign has is that it can create 'money' out of thin air, there's simply no need to pass that off to banks and then find that you have to find both the principle and the interest to re-imberse them. It should be fairly obvious that if that procedure is followed then in no time at all the banks have more spending power than governments do, and more control over the direction a society evolves, even setting aside corruption.
If a gov. creates a billion and spends it directly into it's own economy then in the final analysis every last cent/penny ends up as income for someone, and those someones get to spend it in turn. In this case a tax regime will have to be implemented to keep inflation in check, and inflation will rise according to the stupidity index of government spending, the Chinese manage to keep it to about 10%.
If you include a bank into the process then you have to also recover the whole amount and return it to the bankers who will have to find extraordinary ways to waste the endless largesse, and one of their hobbies will be buying governments simply to sport with. In this case a tax regime will have to be implemented that's somewhat north of 50% in order to reimberse the bankers, none of whose transactions will themselves be taxed, as best I can tell the rate taken as a whole in the US is somewhere around 67% but multi layered and very well disguised.

El Cid

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Re: Banking Systems
« Reply #46 on: February 04, 2023, 02:36:14 PM »
john,

no offense but this is mostly pure nonsense...this is not how the economy works

creating sovereign money, eg. a central bank digital currency would NOT reduce the taxation needed to keep up public services, health care, pensions, armies, etc. It would reduce the risk inherent in the financial system though

LeftyLarry

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Re: Banking Systems
« Reply #47 on: February 05, 2023, 05:32:02 AM »
It's important to note that when you loan money to the bank you join the list of creditors at the very bottom of the food chain.

No, for two reasons.  First, if a firm goes bankrupt, creditors all get paid before shareholders receive a penny.  Second, bank deposits (at least in the US) are insured with a Federal agency.  Depositing money with a bank (or credit union) is about the safest place to put money.

Actually john is dead right on this. When you open an account at a bank, you lend money to the bank, you become a creditor. When a bank goes bankrupt there is usually no money left for creditors (because banks are quite leveraged though not nearly as much as they used to). If your account balance is less than the amount of deposit insurance (100 000 euros in the EU) you can sleep well, anything above that amount is likely going to be lost in a bankruptcy. That is exactly why central bank digital currencies would make sense: no chance of losing yout money in a bankruptcy.

Which is why you are better off keeping money in multiple Banks like I do , the FDIC here guarantees up to $250,000  per account , so I keep at least that amount in more than one Bank as a hedge against catastrophe to any one bank, some in my name, some in my wife’s.

In 2008 , the entire problem was caused by Pelosi and company demanding  that one of the big Banks go down, rather than the Government stepping in and “ bailing them out with guarantees .
Of course they didn’t understand that financial assets prices  are levered to other similar assets and Banks overlapped in many of them and before they knew what was hitting them, the entire system started unraveling.
of course they then provided the necessary guarantees needed anyway, after they had done all the damage and the banks 0aid back every penny given or forced on them by the government with interest .
Another case of the left not understanding what was going on and making a bad but controllable problem, 100 times worse.

johnm33

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Re: Banking Systems
« Reply #48 on: February 05, 2023, 10:20:19 PM »
john,

no offense but this is mostly pure nonsense...this is not how the economy works

creating sovereign money, eg. a central bank digital currency would NOT reduce the taxation needed to keep up public services, health care, pensions, armies, etc. It would reduce the risk inherent in the financial system though
Maybe the economy should work a little more for the populace and somewhat less in faour of the Financial sector. My whole point is taking back the power of money creation from banks.
   A central bank digital currency would be collateralised by ownership of it's customer base and may be better described as central bank direct control, you may be stopped from recharging your car if you make an unauthorised journey, or cut off completely from your/their funds if you don't take that medication, is that what you propose as a legacy for your children. Many don't know that Rome was destroyed by the complete concentration of wealth into the hands of a small elite, they could undercut all business's by using slave labour, failed business owners would then beg to become slaves, the alternative being starvation. The economy grew brittle, there were too few citizens to serve in their armies, mercs were employed Rome got usurped, the city looted and burnt. The houses built, except for the facades, of dried mud bricks melted into the ground and despite 400 years of excavation much of it remains buried under that same mud til' today.
All of the services you describe could be paid for by the gov. simply printing the money itself, and control inflation by a simple transaction tax of about 2.5% on all transactions, compare that to the present situation where there's an overburden of 35%+ in interest charges on every purchase which goes to an ever more gross and demanding financial sector who produce zero benefit.
Here Catherine Austin Fitts spells out the problems of the planned CBDC Not suitable for those who refuse to believe that those with power make plans.
« Last Edit: February 05, 2023, 10:25:43 PM by johnm33 »

El Cid

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Re: Banking Systems
« Reply #49 on: February 06, 2023, 09:03:49 AM »
All of the services you describe could be paid for by the gov. simply printing the money itself, and control inflation by a simple transaction tax of about 2.5% on all transactions, compare that to the present situation where there's an overburden of 35%+ in interest charges on every purchase which goes to an ever more gross and demanding financial sector who produce zero benefit.

That is a huge fallacy.

Currently governments spend 30-50% of GDP on redistribution and NOT on the financial sector. Whether you have commercial banks or not, pensions, armies, roads, schools, etc must be paid for. And this is paid for by the people whether by taxation or by inflation. It does not matter a bit whether you have banks or not in this case. You can not miraculously buy services out of nothing (buy printing money) and think that it wll have no effects. What you suggest is a tried and tested method leading to hyperinflation and ruin.