Slave Finance, Max Keiser, the Next Bank Collapse and Rehypothicated Lager

Most people who like to think of themselves as living in developed countries are sitting around hoping the financial crisis will go away without any effort from them.  It’s a bit like students put into groups to do something on their own – most are work shy, shy or just want to free-ride on someone else’s efforts.

Of course, the crisis hasn’t gone away and most of us have no clue what it has cost us – £6K each in the UK for QE alone.  We don’t know anything about the ‘opportunity costs’ – like, say, where Britain would be if we had not allowed Big Bang and focused the money into agriculture and manufacturing.  The real rip-off of financial services remains unknown to most, though it could have been picked up with 20 minutes a week of Mad Max Keiser on RT (ignoring his dud stuff on return to a gold standard) and the blogs golemxiv, naked capitalism and zerohedge.  Given it’s really almost that easy, we have an awful lot of free-riders prepared to vote without the effort of knowing why.  Of course, I have no vote because I have put the effort in.  I should really cash in, join a bank and laugh at my derision as a know-all, waving my bonus cheque in your face.

The banks started lying when they conned us into thinking they were a valuable part of our economy.  Finance is a cost on production (our hard work) just like any other in standard profit and loss.  You want to push that cost down, like any other, to get reasonable profit.  If we lived subsistence lives turning sod, keeping sheep and cattle, building our own homes, what would we think of a set of suits wanting 15% of our output for doing nothing?  We’d tell them to engage in overexertive sex and travel.

Of course, in our quasi-modern world, finance is partly a genuine work activity – estimates I think generous are that about a third of what is done is legitimate, the rest parasitic.  Down at the pub, my mate Dave can put up a litre of vodka, put the takings through his special till and make £60 quid.  Most of what he steals is tax.  The pub trade is hard these days and Dave is competing with low priced drugs and unlicensed premises where you can get a speedball, a few lagers and a whore for about 50 quid.  Finance has a lot in common with the smuggler-tax-stealer.  Think Starbucks, Google, Amazon – any of the companies you use a lot in the UK and what they declare as profit for tax.  All legal and above board and called tax avoidance, global wage arbitrage, transfer pricing …

It’s much worse than this because tax is not the only pot to be stolen from.  You may think it’s great your house has gone up in price.  Yet much of this inflation is stolen by the banks in a Ponzi scheme in which they lend more and more, taking more and more in fees and interest.  This steals from the next buyers because they have to pay more.  Imagine your reaction to someone trying to sell you a five year old car for twice its original cost.

Now imagine what you would want to happen to a bunch of people discovered investing in slavery.  Have a look at what actually happened to this bunch when Britain abolished slavery.  They got paid out half our exchequer costs in that time (vast amounts in today’s terms), the slaves were ‘freed’ into indenture (40 hours work a week for board and lodging) for seven years to allow the slavers to adjust.  No slave financiers in gaol.  Gladstone was a major player protecting his family’s investments.  Cameron’s lot got a major bail out.

Now you could say that investment in slavery was legal back then (around 1830), much as you might say the Moses of Numbers 31 (a clear war criminal) was a man of his time. This is moral piffle.  Our governments have been bailing out banks – the finance system generally – to massive tune and the crimes are going unpunished much as the slave investors were bailed out.  What would you have wanted in 1830 – for the slavers to have lost their investments and gone personally bankrupt, the slaves receiving what could be liquidated of the estates or what actually happened?

One bank manager I knew went to jail because his investment scheme involved donkeys at Haydock and his bets left a £7 million hole.  Finance as a whole has left Greece and Cyprus in a mess, and Ireland probably has a hole (after the bail out) as big as a third of planned total EU rescue.  You must have noticed the first submissions of bank holes are tiny compared with reality – pulled as someone from Anglo-Irish said from his arse.  The Irish face a bail-in similar to the Cyprus template – from deposits.  Even the Coop, supposedly ethical, are in trouble.  It’s hard to think they weren’t in trouble before they bought Britannia and were about to take on the unwanted bit of Lloyds – this looks like a gamble to cover-up by takeover.  If people in banks are so dumb they can’t do due diligence, why don’t we pay them accordingly – that is sack them as incompetents.  If the Coop got in this trouble without fly-boy wizards into high-yield Zambian collateralised dead donkeys, what is the state of the rest?

I should be able to tell you the current state of banks from their accounts.  After all, I could be teaching your kids finance.  I can’t tell you because no one could on the basis of what they publish.  Like poor students with a bit of guile they can equalise the balance sheet by pulling something from thin air.  Equity (from shares) and deposits are about 30% and after that we are into the nether world of derivatives and values from bank models.  Further in you discover they are claiming past losses as capital – because this can be claimed against tax on future profits.  Spanish banks alone want to turn 35 billion in losses as tax credits so they can use this in Basel III capital.  Don’t smirk about southern Europeans – our banks are already allowed to do this.  70% of what the banks are claiming as assets are valued by – er – banks.  If they gave me the details I could run up a spreadsheet that would show what these assets are worth in a range of situations – my current guess is that as little as a 4% drop in asset prices would crash most banks.  The capital they claim to hold is not a reserve pot they could dip into – much of it is futurology accounting including tax they won’t pay in the future and a variety of tricks with CDOs and other acronyms to make transactions look profitable in future outcomes – very Enron.  Academics have produced a spreadsheet to warn of crash potential – but guess what – the data needed for it is ‘confidential’ and it can’t be run on the real figures.

Ask yourself how, if banks got us into all this trouble (I think 10 times worse than admitted) on past practices, how can we expect them to recover if they are just doing the same things over again?  Many of the assets they are claiming and the security of loans made depend on the real economy they are not investing in (like house prices might rise if we got more wages – but how can this happen without good jobs for us invested in by them).  Do we want them selling us more dud insurance like PPI and interest-rate swaps?  Or front-running our trades?  They were doing much worse.

In a standard liquidation of, say, a manufacturing company, I would be sent off to visit assets.  Plant and machinery listed as worth £100K often turned out to be a liability worth how much it cost to get scrap people to shift it.  What we should do with the banks is send people in with cops to identify what needs to be kept running as a utility, with the rest put to market to find the real value.  I’d actually sequestrate this as I would have sequestrated the slavers’ assets.  The cops should be allowed criminal investigation without political interference.  As we find out what has really gone on, we should decide on a structured debt jubilee (we have, after all, been quasi-slaves of the rich) and economies based on job guarantee before it is too late.

None of this is about capitalism – it’s about getting to genuine democracy and real changes in the way we can live.  Our society is as captured by an idiot, dominant ideology as surely as the Soviet Block once was, or the society that allowed slavery (pretty much all in history).  We need a sea change in our attitudes on money as surely as we needed change on slavery in the past.  The crisis is in leadership – and take a look at what that really was across history (Barbara Kellerman‘s ‘The End of Leadership’).  They have made us apathetic and snide in attitude to criticism, politics so boring no sane person not after feathering his own interest could take part, our political parties hence wide open to infiltration by vested interests of left and right minorities and most of the world in poverty.

I don’t think we have much time to take control.  Flat-bust Germany was able to re-arm under the Nazis in a few years.  They were despicable scum and what we should learn from this is we could mobilise for world peace and to make poverty, like slavery, a thing of the past.  So far, the nearest we have got is Italy and the election of a real clown.  In the UK we have UKIP – much as I like Farrage – and what we need is the opportunity to vote for what matters.

The big crash is coming, the plan now for rich interests to be holding the cash and physical assets when it comes and then buy the rest of the world in the fire-sale.  The crunch may come in Greece, Spain and Portugal (Ireland will go under in a whimper) where there is substantial communist and fascist pedigree (all bent in the past) and the potential for governments that will give up on international debts by declaring national insolvency.  It will start in a couple of months by deposit haircuts in Ireland and later EU (German) moves against Iberia.

I really don’t think our Establishment could bail out slavers today – but the point is they will bail out (and have) the modern slavery we haven’t recognised as such yet, and given the access I could probably link a lot of old slavery money to today’s oligarchs.  1% own nearly everything you can put a monetary value on in a non-slave economy?  I don’t think so.  A lot of the world does live in what we would call slavery – the sweat shops we buy our clothes from and worse.  There has been a third world war (in Africa) most of us didn’t notice – remember the UK war with Indonesia (28,000 dead plus 128 of our brave lads).

There will be a burglar-borrower-from-shops family in the next street to you.  It’s likely they stole a lot less than the bank clerk next door through PPI.  Welfare is puny and mostly well spent compared with what financial services cost us.  Try to work out how the banks make money.  You don’t really know – and there lies the rub – education  didn’t tell you. How is money created and by whom?  The banks create it from thin air and they make money because they get first use of it (the Cantillon effect).  If you put money in a shoebox under the stairs does it breed?  Go and put £100 in your pub’s one-armed bandit and see how long you last until it has gone.  That machine takes 25% of all money that goes in it. Banks are looking for that kind of cut too.  Supermarkets run on 4 – 5% – but some of them may be creaming profit from elsewhere like paying their people squat, laying-off health care costs on welfare, transfer pricing offshore …

Look around and find out what has happened to CEO and bankster “wages” over the years since WW2.  They have been getting more and more money as unemployment rises and everyone else’s wages and general share of wealth has been going down.  So their claims to be working harder and smarter seem unlikely – if they were the engine of  rugby team we’d boot them out and bring in someone else – but their work is not under the scrutiny of the modern rugby player.

Imagine ordering a couple of lagers in a pub.  You have no money, but do have capital to back up your order.  This is in the bank form of previous losses on various derivative bets that failed.  You can use this as Tier 1 capital because you can claim it against future tax liability on future profits.  The economically literate barkeep asks where your future profits will come from and you say your future bets are bound to come up smelling roses.  The barkeep says it will take a minute or two to authorise the transaction..  He comes back with two full glasses.  You take a sip and announce ‘But barkeep, this is urine’.  He points to two large gentlemen sitting in a corner.  ‘No mate, it’s rehypothecated lager those two drank earlier’.  The situation is not eased by the appearance of an Irish banking colleague claiming he can pull 7 billion Euros from his erse.

Moral: the average barkeep knows more about money than the smartest politician or Gaussian copula swinging banker.

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Transparency (2) – We Need Policing

Max Keiser on France24

Max Keiser on France24 (Photo credit: Stacy Herbert)

Bill Black who wrote ‘The Best Way To Rob A Bank Is To Own One’ and actually put some banksters in jail is a voice of sanity.  You can track him  down by googling ‘Naked Capitalism’.  I’ve been convinced for a long time, that if we want real social and political change, we have to accept that we’ll need to police the change.  This won’t be easy as we all rightly fear the notion of a police state and our legal systems are way short of being fair and just a lot of the time.  Ignoring the worst possibilities of our behaviour in Utopian notions of our condition with blandishments such as ‘the State will wither away’ is frankly stupid.  What we do under total solutions is clearly horrible.  We surely have some clues when we properly evaluate the Nazi, Soviet and Maoist lunacies and many others like Jihad and Crusade – right down to such matters as the Spanish fascists stealing babies or Pinochet’s cretins killing mothers after the birth of their children.  This is always closer to home than we care to think, with the likes of the vile Thatcher condoning Pinochet or Bliar taking us into war to present himself with a world stage and a job as JP Morgan’s bag man (he may possibly have followed Churchill into this career).

In the UK, the Metropolitan Police has now lifted the lid off revolting practices by some of our media – simply by doing an investigation instead of covering up.  We have seen the absurdly pathetic expenses scandal in our Parliament and are now seeing that all promises of change were paper tigers.  Our Prime Minister, Bliar Mark Two, is involved with people seeking influence through cash donations.  Some clown is now saying, in Parliament, that we need to look into donations – when we should have stopped the farce long ago.  Millibore demands a proper independent enquiry – but the problem is we don’t know how – the Iraq enquiries and many others (Bloody Sunday) do not produce transparency and prove to be little other than reinforcement of secrecy.  Secret cameras and reporter stings do a better job.  Politicians and big business get away with the equivalent of the bookmaker inspired Pakistani no ball on a daily basis.  Government in Britain has taken the same course year in year out,  Under Nulabour the 18 previous years of Tory rule was to blame and now the 13 years of Nulabour is to blame.  This is true, of course, and is true because we can only elect useless shits,

The following is part of Bill Blacks tirade on the JOBS Act in the USA.

“The sixth form of insanity is a counterfactual.  The unique aspect about this crisis is that it is the first one in modern U.S. history in which the CEOs directing the control frauds that caused the crisis have done so with complete impunity from the criminal laws and near impunity from civil suits and enforcement actions.  The worst, most destructive fraudulent CEOs have been allowed to become and remain wealthy through their frauds even though several of them caused greater losses than the entire S&L debacle.  The worst fraudulent CEOs who led the prior epidemics of accounting control fraud that drove the S&L debacle and the Enron-era crisis were prosecuted.  Not a single elite CEO from Wall Street or the largest fraudulent lenders has even been charged with fraud arising from such loans even though they, collectively, made over two million fraudulent loans in 2006.  Had the Bush and Obama administrations prosecuted and denounced these elite frauds it would have been politically impossible for an act as criminogenic and cynical as the JOBS Act to be promoted by the Obama administration and adopted by large Congressional minorities.  We are seeing with the JOBS Act the sick face of crony capitalism.

The seventh form of insanity is that there is no greater killer of jobs than elite financial fraud.  Such fraud epidemics can hyper-inflate bubbles (as they did in the U.S. and several European nations) and cause severe financial crises and recessions.  The resulting Great Recession has cost over 10 million Americans their existing or future jobs in this crisis.  It has cost over another 15 million people their existing or future jobs in Europe.  The JOBS Act is so fraud friendly that it will harm capital formation and produce additional job losses.  It may appear to be an oxymoron designed by regular morons, but that underestimates the abilities of the lobbyists that drafted this bill.  They are not morons.  They are doing faithful, clever service to their fraudulent clients.  That makes them more dangerous.”

Black makes the point that most of the right applaud the notion of broken windows policing – and yet at the same time cannot bear the idea in financial services or white collar crime generally.  The City of London is basically the centre of a criminal network of financial exploitation.    This should shock no serious student of history or even watcher of the ludic Keiser report (see a few random episodes – http://rt.com/programs/keiser-report/episode-265-max-keiser/).  Things are so bad that a development of Radio Moscow is closer to the truth than our Bimbo Broadcasting Corporation and its embedded incompetents.

We broadly allow the criminal City because of the kind of complex morality that allows us to imagine it is necessary in a dirty world.  Police officers are no more honest than the rest of us, but it’s difficult to imagine how any CJS could work if we do not assume their honesty in giving evidence.  Many trials are decided on our ability to choose between competing accounts – though science tells us we are pretty hapless in doing this.  Once one believes it’s a dirty old  world and corners need to be cut (they often do) because we can’t establish perfection (we can’t), there is a slippery moral slope.  One cannot abandon all of a legal system because of a few flaws.  We cannot abandon or over-regulate our criminal City because this would just let monsters beyond the gate to take over.

Even if we could turn all our weapons to plough shares, this would be no use if Al Queda could step in with a few guns, put our women in black bags and so on.  If we give up on economic dominance, we give up the advantage to others who will arm and take us over,  This isn’t  all rot – and is a bigger part of our chronic ideology than most admit.  The old story in this is that when our dominance is perfect enough, we’ll spread the benefits and get everyone playing along with us.  My guess though  is that the world is as crap now as it was 60 years ago when I was born, if we strip away technological advances (and many of these have just ‘improved’ our killing and planet burning potentials).

My belief is we need a mid-range policing solution not economics to change society for the better.  This is difficult to explain, as i believe the purpose of policing is to keep criminality out of our lives and this involves severe policing of police.  My dog needs a walk.

The Greek Solution Isn’t (it is quantitative shysterism)

The real deadline in Greek debt is this afternoon when a private organisation, largely of banksters, decides whether insurance on this debt (collateral dervative swaps) has been trigger by the so-called credit event.  A number of vulture funds have bought Greek bonds very cheap in the hope of being either to cash in on the insurance or sue the Greek Government for the full price.  So the matter isn’t settled.  Argentina defaulted in 2002 and is still facing court action – a New York court has just ruled against a similar settlement by them.

The banks have sold us generally useless PPI that wouldn’t pay out anyway to people who needed it, we have ‘whiplash’ and other dodgy insurance claims putting our premiums up in the increasing compensation culture and all kinds of finance supposedly guaranteed by derivatives when it isn’t.  This Greek swap does mean some private interests have lost money, but the bonds in question were often held by banks, pension funds and such oddities at the French Post Office.  If the muck was ever really insured the insurer should pay – and the real insurer is us and we are paying by shifting it to public sector (i.e. taxpayer) debt.  All this quantitative shysterism is based on issuing insurance in order to take the fees involved, knowing the ultimate insurer (us) gave no permission.  I’d say this is the equivalent of TWOC or joy riding without a car and people should be going to jail.  There is no need for an intent to permanently deprive (though we have been) – insurance has been sold without there ever being any collateral to pay out, and guilty knowledge of who would have to pay out.  Our money was used (including our future money) to make bets until the point no wins were there to be trousered.

The quantitative shysters are borrowing money from us to make the same bets all over again.  The are shysters because we never get to know what bets they placed, who got paid out and where any of the money is.  Quantitative seems to fit because their excuses are expressed in complicated numbers that actually preclude us knowing the money trail.

Goldman Sachs did the quantitative shystering that hid real Greek debt in foreign currency exchange dealing.  They must have known what they were doing.  And where else has this process taken place?  What is the state of real value of any bonds sold under CDS insurance – the same as the 20 cents on the dollar Greek muck?  This even extends to stuff like student loans (thought to be 20% in default in the US) – loans dependent on future earnings in economies getting crappier.  These are about the same  in total as the sub-prime exposures allegedly behind 2008.

Greece is a pimple in current liabilities.  Even if it has been squeezed, expect an outbreak of acne.  Of CDS is triggered this afternoon, will it be just for the amount of bonds left outside the ‘settlement’ (mostly held under British Law), or have the hedge funds been in multi insuring for a much bigger sum through naked CDS and who might have been dumb enough to sell this for a few quid knowing the bill would be footed by taxpayers?

No solution has been attempted because there is no police investigation into how much money was taken and where that is.  The thieves not only don’t face criminal liability – they have also been in the position, through insider knowledge, to lay bets on the collapse they have caused.  It’s like a burglar being able not only to ransack your house, but also claim the insurance payout.  The Keiser Report may have elements of Radio Moscow about it, but I’m afraid it leaves BBC (Bimbo Broadcasting Corp) dead in the water on what goes on.

When you consider what must now be disclosed to the defence in criminal trials, the lack of disclosure required of banks, hedge funds and the rest so we can defend ourselves against them is Soviet.