Perspectives on the global economic meltdown- (Nov 28 2010)

vishvak · Post by **vishvak** » 12 Jul 2012 18:59

Some news items from Portugal

Portugal: Operations cancelled as medical staff strike. pic here

Portugal gov't pressed to ask for bailout changes

Portuguese court blocks key part of austerity plan

The country's Constitutional Court judges that since a plan to limit extra holiday and Christmas pay is targeted only at public sector workers, it infringes basic principles of equality.

From Spain
Spanish banks secure $36-billion bailout

Spain Borrowing Rate Hits Bailout Danger Zone

..
In order to determine how much of the €100 billion bailout facility Spain will tap, outside auditors are expected to complete rigorous assessments of Spanish banks by July 31. Separate stress tests will also be conducted on individual lenders banks to determine how much each bank needs to strengthen its balance sheets against further economic shocks if they can't raise capital on their own, the official said. These results are due to be published in mid-September.
..
Investors fear a full-blown bailout of Spanish public finances would be too large for the eurozone to handle. The country's economy is the fourth largest among the 17 nations that use the common euro currency — behind Germany, France and Italy - and it is also larger than those of Greece, Ireland and Portugal combined.
..

Graph of Annual GDP % growth in Europe per country - percentage change from previous year

svinayak · Post by **svinayak** » 12 Jul 2012 22:06

The Spreading Scourge of Corporate Corruption

Corporate corruption is the new normal, Americans say

pentaiah · Post by **pentaiah** » 12 Jul 2012 22:16

If the CRR is raised by 1% point Top 10 banks of EU will go under, these include RBS (which is already 80$ owned by the British subjects via Bank Of England), DB, BNP, Credit Agricole
and ho(s)t of German, Dutch, Italian, Spanish backs, the only left out of the catastrophe are Swiss Banks Panama Banks, Cayman Banks, Isle Of man Banks, Banks in St. Kitts where the depositors are owners of the Banks themselves.

I see trees of green backs........ yellow metal roses too
I see em bloom..... for me and for me alone
And I think to myself.... what a wonderful world (to loot)

svinayak · Post by **svinayak** » 14 Jul 2012 08:40

Retirement Outlook: Get Ready for 'Age Warfare'
October 24, 2010 | 43 comments
http://seekingalpha.com/article/231804- ... ge-warfare

I wrote a piece on a federal retirement program that elicited some interesting comments. It was clear to me that there is already a negative bias toward the baby boomers. There is an understanding out there that the boomers are going to be sucking up a great deal of resources in the next decade or so. Some comments:
We have witnessed the unprecedented lack of fiscal responsibility from the majority "Baby Boomer" voter base.

We've met the enemy, and it is the emerging 'ruling class' pensioners of the Baby Boomer generation.

...get ready for AGE WARFARE
As if on cue, the Congressional Budget Office has thrown out some numbers to fire up this emotive issue. The CBO report confirmed (to me) that age warfare is in our future.

CBO looked at all of the scenarios regarding Social Security. They ran a total of 500 simulations that reflect the different variables of the puzzle. The analysis assumed that there would be no changes in current law on SS. The objective of the exercise was to quantify the probabilities of which generation would most likely not get the benefits they were (A) paying for, (B) entitled to and (C) expecting.

The results of the CBO analysis is that there is societal/economic trouble in front of us on this issue. It should come as no surprise to readers that if you are young, you have a problem. The CBO report defines which generation(s) will be hurt and by how much. I found their conclusions to be very troubling.

If you were born in the 1940’s the probability that you will receive 100% of your scheduled benefits is nearly 100%. The people in this age group will die before SS is forced to make cuts in scheduled benefits.

shyam · Post by **shyam** » 16 Jul 2012 05:45

How big could the Libor scandal get?

Useless report. Why I quote this link? To show the pakiness of BBC

What really got Sir Mervyn's goat?

If they are really investigating LIBOR correcting the scam, why doesn't that go up now? Or, in spite of the high media coverage, the scam is still going on?

shyam · Post by **shyam** » 16 Jul 2012 05:49

Market Savior? Stocks Might Be 50% Lower Without Fed

A report from the Federal Reserve Bank of New York suggests that the bulk of equity returns for more than a decade are due to actions by the US central bank.
...
“Blame Greenspan for this S&P 500 effect… it’s his free put,” said Robert Savage, chief executive of research site Track.com and formerly managing director of FX Macro Sales at Goldman Sachs. “Since 1994, the battle of central banks hasn't been to fight inflation, but rather to smooth out the business cycle and credit. The convergence of global rates and inflation left the decisions of the FOMC as the key variable for S&P 500.”

abhischekcc · Post by **abhischekcc** » 16 Jul 2012 10:19

shyam wrote:Market Savior? Stocks Might Be 50% Lower Without Fed
A report from the Federal Reserve Bank of New York suggests that the bulk of equity returns for more than a decade are due to actions by the US central bank.
...
“Blame Greenspan for this S&P 500 effect… it’s his free put,” said Robert Savage, chief executive of research site Track.com and formerly managing director of FX Macro Sales at Goldman Sachs. “Since 1994, the battle of central banks hasn't been to fight inflation, but rather to smooth out the business cycle and credit. The convergence of global rates and inflation left the decisions of the FOMC as the key variable for S&P 500.”

Equities is the tip of the iceberg. The real crime was done since 70s in lifting up the bond market.

Austin · Post by **Austin** » 16 Jul 2012 16:06

The World’s Most Resource-Rich Countries

These are the 10 most resource-rich countries in the world.

10. Venezuela
> Total resource value: $14.3 trillion
> Oil reserves (value): 99.4 billion barrels ($11.7 trillion)
> Natural gas reserves (value): 170.9 cu. ft. ($1.9 trillion)
> Timber reserves (value): not in top 10

Venezuela is among the 10 largest resource holders for iron, natural gas and oil. The South American nation’s natural gas reserves are eighth in the world at 170.9 trillion cubic feet. These reserves account for just over 2.7% of global supply. Venezuela’s oil wealth of 99 billion barrels is the sixth-largest in the world, and account for 7.4% of total global supply. This is based on an estimate that does not include another 97 billion barrels of the country’s extra heavy sour crude, which OPEC included last year in its report on the cartel’s resources. When that estimate is included, Venezuela’s position on this list jumps substantially.

9. Iraq
> Total resource value: $15.9 trillion
> Oil reserves (value): 115 billion barrels ($13.6 trillion)
> Natural gas reserves (value): 111.9 trillion cu. ft. ($1.3 trillion)
> Timber reserves (value): not in top 10

Iraq’s greatest resource is its oil, of which it has 115 billion barrels of proved reserves. This accounts for nearly 9% of the world’s total. Despite being relatively easy to extract, much of these reserves remain untapped because of political differences between the central government and Kurdistan concerning ownership of the oil. Iraq also has among the greatest reserves of phosphate rock in the world, worth more than $1.1 trillion. However, these deposits are completely underdeveloped.

8. Australia
> Total resource value: $19.9 trillion
> Oil reserves (value): not in top 10
> Natural gas reserves (value): not in top 10
> Timber reserves (value): 369 million acres ($5.3 trillion)

Australia’s natural wealth comes from its vast amounts of coal, timber, coal, copper and iron ore. The country is in the top three for total reserves of seven of the resources on our list. Australia has by far the most gold in the world, at 14.3% of global supply. It also has 46% of the global uranium supply, also easily the most. In addition, the country has significant quantities of natural gas offshore the northwest coast, some of which it shares with Indonesia.

7. Brazil
> Total resource value: $21.8 trillion
> Oil reserves (value): not in top 10
> Natural gas reserves (value): not in top 10
> Timber reserves (value): 1.2 billion acres ($17.5 trillion)

Brazil’s sizable gold and uranium reserves largely contribute to its place on this list. It also owns 17% of the world’s iron ore supply, the second most of any nation. Its most valuable natural resource, however, is timber. The country owns 12.3% of the world’s timber supply, valued at $17.45 trillion. In order to maintain consistency in the international numbers we used to make our calculations, we did not include Brazil’s relatively recent discovery of vast quantities of crude oil offshore in what is usually called the presalt. The estimated crude presalt reserves could reach 44 billion barrels, which would propel Brazil’s place up the list.

6. China
> Total resource value: $23 trillion
> Oil reserves (value): not in top 10
> Natural gas reserves (value): not in top 10
> Timber reserves (value): 450 million acres ($6.5 trillion)

The value of China’s resources is heavily based on coal and rare earth minerals. The two resources, combined, provide more than 90% of the country’s total resource value. China also has significant coal deposits, which account for more than 13% of the world’s total. Recently, major shale gas deposits were also discovered in the country. Once estimates of their size become available, China’s status as a world leader in natural resources will further improve.

5. Iran
> Total resource value: $27.3 trillion
> Oil reserves (value): 136.2 billion barrels ($16.1 trillion)
> Natural gas reserves (value): 991.6 trillion cu. ft. ($11.2 trillion)
> Timber reserves (value): not in top 10

Iran shares the Persian Gulf’s gigantic South Pars/North Dome gas field with Qatar. The country is home to nearly 16% of the world’s natural gas reserves — just under one quadrillion cubic feet. The country also has the third-largest amount of oil in the world, with 136.2 billion barrels of proved reserves. This is more than 10% of the world’s oil. The country is having problems realizing the monetary value of its resources due to its estrangement from international markets, stemming from its refusal to abandon its nascent nuclear development program.

4. Canada
> Total resource value: $33.2 trillion
> Oil reserves (value): 178.1 billion barrels ($21 trillion)
> Natural gas reserves (value): not in top 10
> Timber reserves (value): 775 million acres ($11.3 trillion)

Prior to the addition of its oil sands deposits to its proved reserves total, Canada probably would not have even made this list. The oil sands added about 150 billion barrels to Canada’s total in 2009 and 2010. According to most recent estimates, the country now has 178.1 billion barrels, giving it an estimated 17.8% of total global reserves, the second highest behind Saudi Arabia. The country also mines a good deal of the world’s phosphate, even though its deposits of phosphate rock are not among the top 10 in the world. The country also has the second-largest proved reserves of uranium and the third-most available timber.

3. Saudi Arabia
> Total resource value: $34.4 trillion
> Oil reserves (value): 266.7 billion barrels ($31.5 trillion)
> Natural gas reserves (value): 258.5 trillion cu. ft. ($2.9 trillion)
> Timber reserves (value): not in top 10

Saudi Arabia has nearly 20% of the world’s oil — the greatest share among all countries. In fact, all of the country’s resource value is derived from hydrocarbons — either oil or gas. The kingdom has the world’s fifth-largest amount of proved natural gas reserves. Because these resources are depleting, Saudi Arabia eventually will run out of them and lose its high standing on this list. However, this will not happen for several decades.

2. United States
> Total resource value: $45 trillion
> Oil reserves (value): not in top 10
> Natural gas reserves (value): 272.5 trillion cu. ft. ($3.1 trillion)
> Timber reserves (value): 750 million acres ($10.9 trillion)

The U.S. has 31.2% of the world’s proved coal reserves. Worth an estimated $30 trillion, this is by far the most valuable supply of any nation on earth. There is also 750 million forested acres in the country, which are worth nearly $11 trillion. Timber and coal combined are worth roughly 89% of the country’s total natural resource value. The U.S. is also in the top five nations globally for copper, gold and natural gas.

1. Russia
> Total resource value: $75.7 trillion
> Oil reserves (value): 60 billion barrels ($7.08 trillion)
> Natural gas reserves (value): 1,680 trillion cu. ft. ($19 trillion)
> Timber reserves (value): 1.95 billion acres ($28.4 trillion)

Russia is the world’s richest country when it comes to natural resources. It leads all other nations in the size of both its natural gas and timber reserves. The country’s vast size is both a blessing and a curse since economical transportation for gas (pipelines) and for timber (railroads) are significantly costly to build. In addition to having such large gas and timber reserves, Russia has the world’s second-largest deposits of coal and the third-largest deposits of gold. Additionally, it has the second-largest estimated deposits of rare earth minerals, although none are currently being mined.

ramana · Post by **ramana** » 17 Jul 2012 20:44

HSBC admitting to laundering drug money and ALQ monies over eight years.

Looks like total hawala operation yet operates legitimately in US and in West.

Ombaba should take that one down. He can't do much about US banks but this one is the son of BCCII and should be wound up.

Singha · Post by **Singha** » 17 Jul 2012 20:58

that kind of explains why the west wants to gets its claws in and control over iran, iraq and even a tiny non-threat like venezuela on some trumped up charges.

HSBC - http://www.businessweek.com/news/2012-0 ... robe-shows

Theo_Fidel · Post by **Theo_Fidel** » 17 Jul 2012 21:17

Ramana, winding up these banks does nothing at all. These MOFO's jump ship and end up in all the other banks/funds/etc. Bear Stearns/Lehman/AIG folks are now all over wall street. They are shameless.

In the USA today if you steal a loaf of bread to feed your kids you get sent away for 30 years under 3 strikes. (happened recently)

No come backs. You steal millions, collapse your bank, you get golden parachute and corner office in building 1 block down. Congress might force you to say sorry... ..but you can always claim the 5th.

The rich now get to claim things like, you were CEO earning $100,000 but you really did not know anything. You know, the Ken Lay defense....

vishvak · Post by **vishvak** » 17 Jul 2012 21:55

Singha wrote:that kind of explains why the west wants to gets its claws in and control over iran, iraq and even a tiny non-threat like venezuela on some trumped up charges.

HSBC - http://www.businessweek.com/news/2012-0 ... robe-shows

HSBC hid US$16b in Iran transactions: US Senate report
So 'international' banks are banned to do business with Iran with effect in months and Indians have to reduce trade with Iran.

However all HSBC does is 'hide' transactions with Iran, "violating US transparency rules over a six-year period"!! Perhaps 6 years is minimum when first world international transparency mechanism initiates and inquiry to begin with something.

Still more is about 'ignoring' links to terrorist financing among its customer banks, "lowest risk rating to Mexico despite overwhelming information" indicating that Mexico was a high-risk jurisdiction for drug trafficking and money laundering, 'bulk cash' not in millions but worth billions of dollars, er-cetera. the main headers in the report are Terrorist Financing, ‘Severe’ Deficiencies, Bulk Cash, Iran Sanctions, Deferring Prosecution and ‘Pervasively Polluted’.

"HSBC's chief compliance officer and other senior executive in London knew what was going on, but allowed the deceptive conduct to continue," Senator Carl Levin, the subcommittee's chairman, told a hearing where he and other lawmakers grilled HSBC executives and US Treasury officials for failing to sufficiently guard against money laundering.

Is this called first world international behavior, since this includes compliance offers and senior executives too?

paramu · Post by **paramu** » 18 Jul 2012 00:48

I see a trend that British entities are being indicted in US and US entities in UK. HSBC is last in the list, starting with Fox News. Need to keep track of it.

svinayak · Post by **svinayak** » 18 Jul 2012 04:42

interesting

Singha · Post by **Singha** » 18 Jul 2012 07:44

US has been trying to bring its munna to heel, but the munna itself has grown very big and has other nefarious allies and interests from around the world (financial criminals of every stripe) so it has started being unruly and dragging its owner here and there, nipping at its heels and so on.

time will tell who is the owner and who is the dog, or it will end in a 1-1 draw. the munna sure has a lot of dirt on the US given their decades long collaboration on various "projects" around the world like pakistan and afghanistan.

Austin · Post by **Austin** » 19 Jul 2012 12:33

U.S. "fiscal cliff" may cause recession next year: Bernanke

WASHINGTON, July 18 (Xinhua) -- If the scenario of tax increases together with spending cuts, dubbed as the "fiscal cliff," were to occur early next year, it would lead to a "shallow recession" of the U.S. economy, U.S. Federal Reserve Chairman Ben Bernanke warned Wednesday.

The scenario will also result in about 1.25 million fewer jobs to be created in 2013, Bernanke said in his semi-annual monetary policy testimony before the Financial Services Committee of the U. S. House of Representatives.

"Market volatility spiked and confidence fell last summer, in part as a result of the protracted debate about the necessary increase in the debt ceiling. Similar effects could ensue as the debt ceiling and other difficult fiscal issues come into clearer view toward the end of this year," said Bernanke in his written testimony.

Several tax hikes and government spending reductions are set to take effect in January next year, if current laws were not changed. The U.S. public debt ceiling will need to be raised again in late 2012 or early 2013.

Some experts including Bernanke are worried that the "fiscal cliff" might crunch the fragile economic recovery.

Bernanke highlighted the renewed intensification of the eurozone debt crisis and U.S. fiscal uncertainty as the two main sources of risks to the U.S. economic recovery.

It was important to adopt a "gradual approach" to consolidate U. S. federal government's budget to avoid posing a brake on the short-term economic growth, said the U.S. central bank chief.

svinayak · Post by **svinayak** » 19 Jul 2012 21:41

Bay Area drivers could pay to drive each mile under tax proposal

By Mike Rosenberg
[email protected]
Posted: 07/17/2012 02:58:40 PM PDT
Updated: 07/18/2012 09:01:09 AM PDT

Take the poll
Vote: Is a tax that charges people by the number of miles they drive a good idea?
Related Stories
Jul 18:
Mercury News editorial: Car tax idea is out of the box: Put it back!
Imagine being taxed a dollar for driving to the store. Commute to work? That'll be a few bucks more.
Is it crazy or the way of the future? The Bay Area is considering a long-range plan to become the first place in the nation to tax drivers for every mile they travel, with an average bill of up to $1,300 per year.
The proposal is a long way from becoming reality. But under the scenario, drivers would likely have to install GPS-like trackers on their cars to tally travel in the nine-county Bay Area, from freeways to neighborhood streets, with only low-income people exempted.
Transportation planners know they would have a tough time selling such a radical plan but argue the goal of the so-called VMT (vehicle miles traveled) tax is to reduce traffic and pollution while raising revenue needed to fill potholes and bolster public transit service.
"I don't want to say it's pie in the sky. A VMT charge is really an option for the future to be looked at and considered," said Randy Rentschler, spokesman for the Metropolitan Transportation Commission, the agency leading the effort. He said realistically the plan is so complex it might take a decade to implement if the public buys in.
Under the early proposal, the VMT tax could cost up to a dime per mile, or the cost may peak during rush hour and bottom out, perhaps to less than a penny per mile, when the roads are mostly empty.
"Are you kidding me?" said South Bay driver
Advertisement

Kevin Spencer of Yellow Checker Cab. "It's ludicrous. Some of the families, blue-collar people just trying to make a living, could have to decide whether to pay their mortgage" or drive.
County supervisors and city council members from around the Bay Area, as members of the Metropolitan Transportation Commission and the Association of Bay Area Governments, are set Thursday to authorize a study of the proposal, though they haven't yet weighed in on the actual merits of a VMT tax. If approved, officials would likely need the OK from voters and the Legislature.
But first, they'd have to overcome major concerns about Uncle Sam reaching deeper into your pocket and Big Brother looking over your shoulder. Experts generally think VMT taxes have merit but won't be realistic until the primary source of transportation funding -- taxes on each gallon of gas -- dries up.
"It really would be premature in the next five years to even think about trying something like this," said former presidential transportation adviser Bob Poole, who supports VMT taxes but called the Bay Area plan too "utopian" to be realistic. "There are a huge number of questions that need to be worked on."
Proponents from transit advocates to environmentalists to public policy planners say new thinking is needed to reduce rush-hour traffic as the Bay Area grows and needs new ways to raise billions of dollars to strengthen a deteriorating transportation network.
"We can continue to have more and more potholes and have BART fall apart more frequently, or we can choose to invest in our common future," said Jeff Hobson, deputy director of Oakland-based TransForm, one of the nonprofits that first proposed the idea to the government agencies.

http://www.mercurynews.com/peninsula/ci ... :0|order:5

Hari Seldon · Post by **Hari Seldon** » 20 Jul 2012 05:41

The weaponization of economic theory

Awesome piece folks. Recommended read.

The term “neoliberalism” misrepresents and even inverts the classical liberal idea of free markets. It is a weaponization of economic theory, kidnapping the original liberal ethic that sought to defend against special privilege and unearned income. To classical economists, a free market meant one free of unearned income, defined as land rent, natural resource rent, monopoly rent and rent-extracting privilege. But to neoliberals a free market is one free from taxes or regulation of such rentier income, and indeed gives it tax favoritism over wages and profits.

And some practical implications too.

As in Europe, there is little alternative from the ostensible left – from the Democratic Party, the labor unions and allied interests. President Obama seems likely to win this November’s presidential elections, and he is a neoliberal – probably more so than the Republican candidate Mitt Romney.

The common backers of the Republican and Democratic Parties – mainly, Wall Street and real estate interests – realize that a Democratic President is in a better position than a Republican to neutralize Congressional or Senate opposition to scaling back and privatizing Social Security and Medicare. Democratic politicians are more likely to counter Republican proposals along these lines than proposals put forth by their party’s own president. The situation is much like Tony Blair out-Thatchering Britain’s Conservatives in trying to privatize British rail and tube infrastructure and promoting the Public-Private Partnership plan. This is essentially the Rubinomics position supported by the Democratic leadership.

Many voters simply will stay home, so Mr. Romney may have a chance to win, based on support in the South and the West – and even perhaps some Midwestern swing states. In either case, the 2013-16 administration looks like it will be a bipartisan neoliberal austerity.

Not to mention bold predictions on the turd world front...

Instead of international “cooperation,” I see a regional rivalry among blocs polarizing between the U.S.-centered NATO bloc and the BRICS, expanding their influence. Europe looks pretty much left out, as its markets are not growing and it is not a prime investment area. The BRICS countries are likely to start erecting capital controls against easy-credit policies in the United States funding a takeover of their assets.

Financial flows and capital flight are putting upward currency pressure on the BRICS at the expense of the euro and the dollar. If the euro does not decline against the dollar, it is largely because both currencies are equally weak together and share similar problems. Both economies will shrink, leading to more insolvency for real estate and also for government budgets. This Euro-American shrinkage is likely to spur moves in China and other BRICS to rely more on growth of their internal market. China’s wage levels are likely to rise, prompting production to aim more to satisfy domestic consumer demand than foreign export demand.

Ohh..read it all only...

pentaiah · Post by **pentaiah** » 20 Jul 2012 06:00

there are lot of fallacies in the above article

to start with Debt deflation is really asset deflation.
If Paul Krugman prescription is filled Hyper inflation will result just like in Zimbabwae.
Because the new money injected is not worth the old money which was used for the (deflated) asset, therefore the real estate prices and all good will cost more.
The only saving grace for US is that $ is the de facto currency world wide for trading which the Euro does is not ( the clout)

One more thing
Recall that during the real estate bubble ( and also normal times) the Home appraisal is relative , that is comparable sq foot home in that subdivision or nearby (4) home prices are taken and then the Home on sale (for appraisal ) value is calculated. In good old days ( before exotic ARM bridge loans etc came about) 20 to 30 percent down payment was required and with PMI ( Payment Mortgage Insurance) in case the home owner defaulted the Insurance would pay back the title holder usually Bank.
Its all maya of Dollar
there is no more Dena Bank
only Lena Bank

shyam · Post by **shyam** » 20 Jul 2012 09:57

Are Big Banks Criminal Enterprises?

Go to above link if you want to click the links in the message below.

Big Banks Don’t Commit Any Crimes … Do They?

Here are some recent improprieties by the big banks:

Laundering money for drug cartels. See this, this, this and this (indeed, drug dealers kept the banking system afloat during the depths of the 2008 financial crisis)

Laundering money for terrorists

Engaging in mafia-style big-rigging fraud against local governments. See this, this and this

Shaving money off of virtually every pension transaction they handled over the course of decades, stealing collectively billions of dollars from pensions worldwide. Details here, here, here, here, here, here, here, here, here, here, here and here

Charging “storage fees” to store gold bullion … without even buying or storing any gold . And raiding allocated gold accounts

Committing massive and pervasive fraud both when they initiated mortgage loans and when they foreclosed on them (and see this)

Pledging the same mortgage multiple times to different buyers. See this, this, this, this and this. This would be like selling your car, and collecting money from 10 different buyers for the same car

Cheating homeowners by gaming laws meant to protect people from unfair foreclosure

Committing massive fraud in an $800 trillion dollar market which effects everything from mortgages, student loans, small business loans and city financing

Engaging in insider trading of the most important financial information

Pushing investments which they knew were terrible, and then betting against the same investments to make money for themselves. See this, this, this, this and this

Engaging in unlawful “frontrunning” to manipulate markets. See this, this, this, this, this and this

Engaging in unlawful “Wash Trades” to manipulate asset prices. See this, this and this

Otherwise manipulating markets. And see this

Participating in various Ponzi schemes. See this, this and this

Charging veterans unlawful mortgage fees

Cooking their books (and see this)

Bribing and bullying ratings agencies to inflate ratings on their risky investments

The executives of the big banks invariably pretend that the hanky-panky was only committed by a couple of low-level rogue employees. But studies show that most of the fraud is committed by management.

Indeed, one of the world’s top fraud experts – professor of law and economics, and former senior S&L regulator Bill Black – says that most financial fraud is “control fraud”, where the people who own the banks are the ones who implement systemic fraud. See this, this and this.

But at least the big banks do good things for society, like loaning money to Main Street, right?

Actually:

The big banks no longer do very much traditional banking. Most of their business is from financial speculation. For example, less than 10% of Bank of America’s assets come from traditional banking deposits. Instead, they are mainly engaged in financial speculation and derivatives. (and see this)

The big banks have slashed lending since they were bailed out by taxpayers … while smaller banks have increased lending. See this, this and this

A huge portion of the banks’ profits comes from taxpayer bailouts. For example, 77% of JP Morgan’s net income comes from taxpayer subsidies

The big banks are literally killing the economy … and waging war on the people of the world
And our democracy and republican form of government as well

vishvak · Post by **vishvak** » 20 Jul 2012 20:48

I am in two minds whether to post a long post or not. Please delete if redundant, not required, too long, etc.

About Libor Scandal, from a blog

From Receive Only a Light Slap on the Wrist

according to the CIA’s World Factbook, the global economy – as measured by the world’s gross domestic product – is less than $80 trillion.

In contrast, over $800 trillion dollars worth of investments are pegged to the Libor rate.
..
the derivatives market is approximately $1,200 trillion dollars. Interest rate derivatives comprise the lion’s share of all derivatives, and could blow up and take down the entire financial system.
..
The largest interest rate derivatives sellers include Barclays, Deutsche Bank, Goldman and JP Morgan … many of which are being exposed for manipulating Libor.

They have been manipulating Libor on virtually a daily basis since 2005.

They are still part of the group of banks which sets Libor every day, and none have been criminally prosecuted.
..
The U.K. bankers and regulators charged with reviewing Libor in the wake of regulatory probes are resisting calls to overhaul the rate because structural changes risk invalidating trillions of dollars of contracts. .. won’t propose structural changes such as basing the rate on actual trades or taking away oversight of the benchmark from the BBA
..
Libor is determined by a daily poll that asks banks to estimate how much it would cost them to borrow from each other for different timeframes and in different currencies. Because banks’ submissions aren’t based on real trades, academics and lawyers say they are open to manipulation by traders.
..
“I don’t see a significant enhancement to the reputation of Libor without basing it on actual transactions,” said Rosa Abrantes-Metz, an economist with Global Economics Group, a New York-based consultancy
..
“It would only be disruptive if current quotes are inaccurate,” so resistance “is suspicious,” she said.
..
Traders interviewed by Bloomberg in March at three firms said they were given no guidance on how Libor should be set and there were no so-called Chinese walls preventing contact between the treasury staff charged with submitting the rate and traders who stood to profit on where Libor was set each day. They regularly discussed where Libor would be set with their colleagues and their counterparts at other firms, they said.
..

From Why Is the Libor Scandal So Important to You?

But the Libor scandal is the biggest financial scam in world history
..
dwarfs by orders of magnitude any financial scams in the history of markets.
..
the largest rigging of prices in the history of the world by many orders of magnitude.
..
the scandal effects an $800 trillion dollar market – 10 times the size of the real world economy.
..
the “mega scandal of all mega scandals”, because Libor is the “sun at the center of the financial universe”, and manipulating Libor means that “the whole Earth is built on quicksand.”
..
Local governments, credit card holders, students, small businesses, small investors, homeowners and virtually everyone else in the entire world has been impacted by the manipulation.
..

Out of 800 trillion $, i could only find:
1) Credit card debt – almost a trillion dollar market – is pegged to Libor.
2) So are student loans – a trillion dollar market.
3) Mortgages are a bigger market: around $10 trillion dollars
4) Other loans – like small business loans – are usually based on Libor as well.
5) $350 trillion in swaps tied to Libor. Virtually every single local government in the United States has been scalped by Libor manipulation.

First World International standards from the First World International people.

From Local Governments Which Entered Into Interest Rate Swaps Got Scalped

(In USA)

municipal borrowers used swaps to guard against the risk of higher interest costs on variable-rate debt by exchanging payments with another entity and tying how much they pay to an underlying value such as an index. The agreements can backfire if rates move in unexpected directions, resulting in issuers making larger payments.
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Instead, rates dropped. .. yield on two-year Treasury notes fell ..
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For more than a decade, banks and insurance companies convinced local governments, hospitals, universities and other non-profits that interest rate swaps would lower interest rates on bonds sold for public projects such as roads, bridges and schools.
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The swaps were entered into to insure against a rise in interest rates; but instead, interest rates fell to historically low levels.
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It was a deliberate, manipulated move by the Fed, acting to save the banks from their own folly in precipitating the credit crisis of 2008. The banks got in trouble, and the Federal Reserve and federal government rushed in to bail them out, rewarding them for their misdeeds at the expense of the taxpayers.
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Banks and borrowers were supposed to be paying equal rates: the fat years would balance out the lean. But the Fed artificially manipulated the rates to the save the banks. ..
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After the credit crisis broke out, borrowers had to continue selling adjustable-rate securities at auction under the deals. Auction interest rates soared when bond insurers’ ratings were downgraded because of subprime mortgage losses; but the periodic payments that banks made to borrowers as part of the swaps plunged, because they were linked to benchmarks such as Federal Reserve lending rates, which were slashed to almost zero.
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it would have been clear that this was not going to be a good deal over the life of the contracts. So the states and municipalities were entering into these long maturity swaps out of necessity. They were desperate, if not naive, and couldn’t look to the Federal Government or Congress and had to turn themselves over to the banks.
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the federal government aggressively drove down interest rates to save the big banks. This created opportunity for banks – whose variable payments on the derivative deals were tied to interest rates set largely by the Federal Reserve and Government – to profit excessively at the expense of state and local governments.
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these state and local governments have no way of getting out of these deals. Banks are demanding that state and local governments pay tens or hundreds of millions of dollars in fees to exit these deals. In some cases, banks are forcing termination of the deals against the will of state and local governments, using obscure contract provisions written in the fine print.
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borrowers had paid over $4 billion just to get out of the swap deals.
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Oakland signed an interest rate swap with Goldman in 1997. .. Across the Bay, Goldman Sachs signed an interest rate swap agreement with the San Francisco International Airport in 2007 to hedge $143 million in debt. Today this agreement has a negative value to the Airport of about $22 million, even though its terms were much better than those Oakland agreed to.

at Goldman Sachs, the gullible bureaucrats on the other side of these deals were called “muppets.”
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The banks have made outrageous profits by capitalizing on their own misdeeds. They have already been paid several times over: first with taxpayer bailout money; then with nearly free loans from the Fed; then with fees, penalties and exaggerated losses imposed on municipalities and other counterparties under the interest rate swaps themselves.
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The windfall of revenue accruing to JP Morgan, Goldman Sachs, and their peers from interest rate swap derivatives is due to nothing other than political decisions that have been made at the federal level to allow these deals to run their course, even while benchmark interest rates, influenced by the Federal Reserve’s rate setting, and determined by many of these same banks (the London Interbank Offered Rate, LIBOR) linger close to zero. These political decisions have determined that virtually all interest rate swaps between local and state governments and the largest banks have turned into perverse contracts whereby cities, counties, school districts, water agencies, airports, transit authorities, and hospitals pay millions yearly to the few elite banks that run the global financial system, for nothing meaningful in return.
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“These financially unsophisticated local officials were being exploited by big banks,”
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The financial crisis had pushed up the cost of its bonds, including the auction-rate debt, and required early repayments that the county couldn’t afford. The swaps tied to the securities also didn’t shield it from rising expenses.
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(In UK)
In January 1991, the U.K. House of Lords ruled that local authorities weren’t permitted to use swaps and derivatives. Parliament’s upper chamber said such agreements had “the stigma of being unlawful.” Municipal authorities, including the London borough of Hammersmith & Fulham, had speculated on the direction of borrowing costs in the late 1980s using interest-rate swaps. Auditors challenged the transactions, resulting in a series of court rulings that said such activities were outside of the council’s jurisdiction and thus unenforceable by banks involved.

In 1997, the U.K. barred local governments from investing in derivatives.
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(In Greece)
Greece used currency swaps, the biggest of which were with Goldman Sachs Group Inc., to hide 5.3 billion euros ($7.7 billion) of debt from 2001 to 2007, Eurostat, the European Union’s statistics office, said in a May report. When the arrangements were added to the nation’s accounts, it spurred a surge in borrowing costs and triggered Europe’s debt crisis.
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municipal taxpayers have paid $20 billion in fees(already?) on swaps valued at $1 trillion in the past five years, noting that banks usually get about 2 percent on such transactions.
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(back to USA)
The financial system’s near collapse, the federal government’s unprecedented bailouts, and global economic stagnation mean that the derivative products once touted as prudent hedges against uncertainty have instead become toxic assets, draining billions from the public sector.
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The MTC is only one example. Local governments and agencies across the United States have been caught in a perfect storm that has turned their “brilliant” hedging instruments into golden handcuffs. The result is something of a second bailout for the Wall Street banks on the other sides of these deals.
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Perhaps worst of all has been the double standard set by the federal government. In 2008 when the world’s biggest banks stumbled toward insolvency, the U.S. Treasury stepped in to inject capital through the Troubled Asset Relief Program (TARP). TARP allowed the banks to offload or restructure their most toxic holdings, including many derivatives like interest rate swaps.

Four years later no such relief has been mobilized for cities, counties, and public agencies suffering from the toxic interest rate swaps they have been forced to hold.
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What swaps allowed many governments to do was to replace a floating rate with a synthetic fixed rate that was often significantly lower than would otherwise be possible if the local government itself directly issued a fixed-rate debt. Local governments tend to be able to issue slightly lower initial variable-rate debt than other sorts of borrowers (mostly large business corporations) can in other debt markets. Conversely, many banks and corporations can issue fixed rate debt at significantly lower rates than local governments have been able to. Big banks figured out how to profit from these differences with rate swaps. By issuing debt in the most favorable terms and then swapping interest-rate payments, a local government could transform its relatively low but risky variable-rate debt payment into a higher fixed-rate obligation that is lower than it would have otherwise been had the government gone straight to the market to sell fixed-rate bonds.
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More recently, researchers in New York and Pennsylvania have dissected specific swap deals that have drained millions from local school systems, transit agencies, and the budgets of cities and counties. New York state and its local governments were forced to pay $236 million last year to fulfill the terms of swap agreements signed with Wall Street, according to a December, 2011 report prepared by United NY, a union-supported advocacy group. These swap payments are ultimately drawn from taxes, fees, and other sources of public revenues, diverted away from crucial services that have been cut back during the Great Recession.
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First world banking practices for the whole world!

I am not able to find a link in an Indian news report, where Goldman Sachs were passing comments on trading in India!

shyam · Post by **shyam** » 22 Jul 2012 12:13

Interesting video, Max Keiser interviews Gerald Celente

svinayak · Post by **svinayak** » 22 Jul 2012 22:27

Vertical Immobility: American dream too steep to climb

What used to be known as the land of opportunity slowly becomes a place where many have little to look forward to. For the first time since the Great Depression people no longer have prospects to do better than their previous generation. RT's Marina Portnaya reports on what the economic crisis have left of the American dream.

Singha · Post by **Singha** » 23 Jul 2012 20:33

well it had to taper off sooner or larger. America has enjoyed strong growth and increasing prosperity from after the civil war till date which is around 150 yrs already!
thats more a continuous run of 4-5 good kings would have ensured in a old kingdom...beyond that all dynasties tended to produce imbeciles or weaklings who got pushed out by a new dynasty...

Theo_Fidel · Post by **Theo_Fidel** » 23 Jul 2012 20:55

Singha,

I think you missed the point of the article.

American GDP has continued to grow. Even now at a measly 2% growth it is adding $300 Billion to itself every year due to increasing worker productivity. Normally about 2/3 of that would go towards increasing worker salaries. When one considers that America's wage bill is ~ $5 Trillion annually, this should mean a 4%-5% wage growth. But nothing, like this is happening.

Any numbers of charts have shown this but here is one. The question is where did all that wealth disappear too. The answer is self evident.

Note when the decoupling begins, the Reagan years. Economically all these disasters can be traced back to Reagan decoupling wages at the top from wages for the employees.

Economically America is now worse than a Banana republic... ..those who work and generate wealth are cruelly exploited by the financial overlords who dish out 'Jumbo' mortgages and capture the entire revenue stream.

But you are right that at some point this kind of kleptocracy becomes senile and tone deaf and ends up triggering revolution. The great depression of 1930's did not cause revolution immediately. For another 20 years Americans plugged along with predatory capitalism, hoping things would improve. They are a tragically hopeful people. But eventually revolution came, with the new deal and civil rights and social programs. Americans are willing to accept the horrific pain of naked capitalism as long as there is a proper safety net to catch them. The predatory class does not want this safety net even and has gutted it.

Revolution is coming. In America everything is delayed....

pentaiah · Post by **pentaiah** » 23 Jul 2012 23:55

^^
Absolutely correct I would add that the seeds of decline were sowed by Nixon and Kissinger when they opened up to PRC with trade.

I am surprised that none of the political big wigs in US are after GE chief Jack welsh who at every instance kept parroting how US can sell to 1.5 billion people in PRC but in reality not a dime of worth has been made except for defense electronics export and IP give aways

Singha · Post by **Singha** » 24 Jul 2012 08:22

actually thats not true. china is a big market for US machinery, software, civil airplanes, and chinese production helps US overlords to produce a ipod or sneaker cheaply and rake in huge profits which atleast benefits the stock owning class - pretty much all who have a 401k atleast.

US manufacturing has definitely lost out.

its true that US banks, insurance, media like movies & TV have not been able to upend and capture the place....panda keeps a leash on stuff like that.

Bade · Post by **Bade** » 24 Jul 2012 08:36

Is there a similar plot shown above for India ?

vic · Post by **vic** » 24 Jul 2012 09:51

Even with manufacturing collapsing all over the western world, hardly anybody is calling upon China to revalue their currency. Is the clout of MNC retailers, so powerful?

shyam · Post by **shyam** » 24 Jul 2012 10:24

Too Big To Fail – Fed Proposal Allows Banks To Seize Your Money

The New York Fed has introduced a framework to give banks the right to suspend account withdrawals at will to defend against financial panic.
The shadow central planners have proposed new contigency plans to prevent the Great Depression style bank runs that are hitting Europe from spreading to America.

Their solution is the creation of a framework that consists of “capital controls” which allow financial institutions that find themselves in hot water to limit or outright suspend customer account withdrawals.

pentaiah · Post by **pentaiah** » 24 Jul 2012 20:29

So after all neshant has been right about banking
Not allowing withdrawals is like no hebraic corpus law provision

hnair · Post by **hnair** » 25 Jul 2012 00:08

Bade wrote:Is there a similar plot shown above for India ?

Bade-saar, you can use the same plot for India

Just swap the labels of the red and yellow curves
(The divergent point being start of IT-vity boom era in the mid-90s)

Bade · Post by **Bade** » 25 Jul 2012 01:32

Just shift the time line for India, I see.

So the IT-Vity+VC+WallSt folks in massa are going to make themselves and rest of us extinct as a species. We just need code writing bots, exchanging virtual products and services ad infinitum and GDP goes through the roof along with productivity, and the yellow curve can go all the way down in the far future and we will not have to discuss economic meltdown either.

shyam · Post by **shyam** » 25 Jul 2012 10:38

Second wave of foreclosures starts to rise in New Jersey, region

ranjbe · Post by **ranjbe** » 26 Jul 2012 06:03

Uksthan now officially in double-dip recession.

The economy shrank by 0.7 per cent between April and June, the Office for National Statistics said. It is now smaller than when the Coalition came to power in 2010.
Since then, the Chancellor has pursued a strict policy of austerity – “Plan A” – in an attempt to bring down the deficit, leading to accusations that he has not done enough to stimulate growth.
Wednesday’s fall was worse than expected and means that Britain is firmly back in recession, with negative growth for the past nine months.
Amid a growing clamour from business groups for radical action, one senior Conservative figure admitted that the economy was likely to be in “intensive care” for another two years

http://www.telegraph.co.uk/news/politic ... epens.html

Singha · Post by **Singha** » 26 Jul 2012 12:18

western economies are like vampires...to recover from intensive care they will need to suck blood and drain other creatures...question is who will be the fall guys?

Christopher Sidor · Post by **Christopher Sidor** » 27 Jul 2012 22:31

This week the ECB head put his credibility on line and said that the bank would do everything possible to prevent a breakup of EURO. And for emphasis he said "It will be enough". There is an assumption going around that ECB has unlimited ammunition. Basically what it means is that since ECB can print the currency of Euo-Zone, it can theoretically buy unlimited of debt, whether corporate or sovereign, either directly or from secondary markets. But like it is said theory and practice are two different worlds and they shall never meet. The problem is that if ECB buys massive amounts of bonds or shifts its lending rate to 0% then might lead to inflation or hyper inflation. The mandate of ECB is to maintain price stability, i.e. rein in inflation. Unlike the US Fed the mandate of ECB is not to maintain optimum employment. That is a mandate of the elected representatives of Euro-Zone countries.

There is another problem with ECB bond buying. ECB has tried this in the past and what has happened is that Banks hoarded the money or bought more sovereign debt with it. What banks did not do is lend it out cheaply and easily to industries and civilians.

And therein lies the crux of the matter. ECB wants banks to lend. Banks cannot lend. It may be due to their balance sheet mess or it may be because they have tightened the rules of lending or they do not have trust in their contemporaries, take your pick. This is aggravated by the insistence of austerity being imposed on certain Europe nations or some countries like UK self imposing it. Europe has to break out of this vicious cycle. Not only for itself, but for the whole world.

Europeans have been bailing out banks. But what they are not realizing is that they are creating Zombie banks. Banks unless and until help take part in circulating money in the economy and take the risk in this circulation are useless.

After the dreadful war of Kurkushetra, Arjun watched to his horror that his chariot was being burned to ashes along with its horses. With Tears filled in his eyes he looked at the lord who was sternly watching the burning. "Why" asked Arjun. The lord answered, "Once nature has no use of something, it is discarded. Once our purpose in life is fulfilled we too die."

vera_k · Post by **vera_k** » 28 Jul 2012 12:27

As happens with other things before their time, the EURO will die simply because Europe is not done disintegrating.

shyam · Post by **shyam** » 31 Jul 2012 11:54

In a way, Iran is taunting western governments.

Capital punishment for capital crimes.

Four sentenced to death over $2.6bn Iran bank fraud

shyam · Post by **shyam** » 31 Jul 2012 12:07

Is Facebook’s Ad Model a Scam?

You know what we found? The 80% of clicks we were paying for were from bots. That’s correct. Bots were loading pages and driving up our advertising costs. So we tried contacting Facebook about this. Unfortunately, they wouldn’t reply. Do we know who the bots belong too? No. Are we accusing Facebook of using bots to drive up advertising revenue. No. Is it strange? Yes. But let’s move on, because who the bots belong to isn’t provable.