Tag: banks

Two more bankers down

1.A mere two weeks since former JPMorgan banker, Kenneth Bellando jumped to his death, Bloomberg reports that
the former CEO of Dutch Bank ABN Amro (and his wife and daughter) were found dead at their home after a possible “family tragedy.”
This expands the dismal list of senior financial services executive
deaths to 12 in the last few months. The 57-year-old Jan Peter
Schmittmann, was reportedly discovered by his other daughter when she
arrived home that morning. Police declined to comment on the cirumstances of his (and his wife and daughter’s) death.

2.  Over the weekend the world was gripped by the drama surrounding the mysterious murder-homicide of
the former CEO of Dutch bank ABN Amro and members of his family, and
whether there is more foul play than meets the eye. However, that is
nothing compared to what just happened in the tiny, and all too quiet
Principality of Lichtenstein, where moments ago the CEO of local
financial institution Bank Frick & Co. AG, Juergen Frick, was shot dead in the underground garage of the bank located in the city of
Balzers. 

I don’t even have any theories at this point. It’s a moment of High Weirdness as the various deaths are more random and outlandish than one would expect to find in a thriller. But regardless of what is actually taking place, it does seem readily apparent that we are not dealing with a normal situation in the financial world here.

Even the most inventive fiction writer would struggle to fit the demise of European bankers, a CIA agent, and Peaches Geldof all into the same novel.

The Bank of England explains money creation

This is from “Money creation in the modern economy“, an article published in the Bank of England Quarterly Bulletin 2014. The bold text is in the original.

In the modern economy, most money takes the form of bank deposits. But how those bank deposits are created is often misunderstood: the principal way is through commercial banks making loans.

Whenever a bank makes a loan, it simultaneously creates a matching deposit in the borrower’s bank account, thereby creating new money. The reality of how money is created today differs from the description found in some economics textbooks:

  • Rather than banks receiving deposits when households save and then lending them out, bank lending creates deposits.
  • In normal times, the central bank does not fix the amount of money in circulation, nor is central bank money ‘multiplied up’ into more loans and deposits.

Although commercial banks create money through lending, they cannot do so freely without limit. Banks are limited in how much they can lend if they are to remain profitable in a competitive banking system. Prudential regulation also acts as a constraint on banks’ activities in order to maintain the resilience of the financial system. And the households and companies who receive the money created by new lending may take actions that affect the stock of money — they could quickly ‘destroy’ money by using it to repay their existing debt, for instance.

Monetary policy acts as the ultimate limit on money creation.

The Bank of England aims to make sure the amount of money creation in the economy is consistent with low and stable inflation. In normal times, the Bank of England implements monetary policy by setting the interest rate on central bank reserves. This then influences a range of interest rates in the economy, including those on bank loans.

In exceptional circumstances, when interest rates are at their effective lower bound, money creation and spending in the economy may still be too low to be consistent with the central bank’s monetary policy objectives. One possible response is to undertake a series of asset purchases, or ‘quantitative easing’ (QE).

QE is intended to boost the amount of money in the economy directly by purchasing assets, mainly from non-bank financial companies. QE initially increases the amount of bank deposits those companies hold (in place of the assets they sell). Those companies will then wish to rebalance their portfolios of assets by buying higher-yielding assets, raising the price of those assets and stimulating spending in the economy.

This proves that Paul Krugman and the Neo-Keynesians clinging to their textbook Samuelsonian  Econ 101 have it wrong. It also shows very clearly why credit is the vital issue and why the paper-printing of the past is not going to lead to hyperinflation, but the eventual collapse of total credit market debt is going to lead to deflation.

The BoE even spells it out; “money” can be destroyed by using it to repay existing debt… or defaulting on it. By money, of course, they mean “credit money”, which is the only sort of money that matters in terms of the current global financial system.

Concerning which, Zerohedge quotes Robert H. Hemphill, Credit Manager of the Federal Reserve Bank of Atlanta:

If all the bank loans were paid, no one could have a bank deposit, and there would not be a dollar of coin or currency in circulation. This is a staggering thought. We are completely dependent on the commercial Banks. Someone has to borrow every dollar we have in circulation, cash or credit. If the Banks create ample synthetic money we are prosperous; if not, we starve. We are absolutely without a permanent money system. When one gets a complete grasp of the picture, the tragic absurdity of our hopeless position is almost incredible, but there it is. It is the most important subject intelligent persons can investigate and reflect upon. It is so important that our present civilization may collapse unless it becomes widely understood and the defects remedied very soon.

And, as I have repeatedly stated over the last six years, the Fed cannot print borrowers. There is no “permanent money” in this particular monetary system, which is another way to say that this is a “credit money-substitute” system. This little fact explains why Congress and the Executive Branch agencies inexplicably permit the bankers to openly flout the law; they are collectively deemed too structurally important to fail or even be held legally accountable.

The curse of the Youtube song

Actually, according to Zerohedge, the number of banker suicides is now 11:

The financial world has been rattled by a rash of apparent suicides, with some of the best and brightest among the finance workers who have taken their lives since the start of the year. A majority of the eight suicides of 2014 have been very public demonstrations, which has suicide-prevention experts puzzled.

“Jumping is much less common as a method for suicide in general, so I am struck by the number that have occurred in recent months in this industry,” said Dr. Christine Moutier, chief medical officer of the American Foundation for Suicide Prevention.

Perhaps it is because they are not suicides. I was somewhat dubious about the sudden rash of banker deaths, particularly after hearing about the guy who tortured himself with a nail gun. And the 11 deaths doesn’t include Jeffrey Corzine. Bankers have stolen homes and deposits from hundreds of thousands of people and ruined thousands of lives. It seems highly improbable that all of those people are now in a perfect state of Zen equilibrium and have no interest in seeking revenge.

Irony

Perhaps if he had said something to this effect back in 2008, the problem might have been addressed, if not necessarily averted:

George Soros, the billionaire investor, believes the banking sector is a “parasite” holding back the economic recovery and an “incestuous” relationship with regulators means little has been done to resolve the issues behind the 2008 crisis.

“The banking sector is acting as a parasite on the real economy,” Mr Soros said in his new book “The Tragedy of the European Union”.

“The profitability of the finance industry has been excessive. For a while 35pc of all corporate profits in the United Kingdom and the United States came from the financial sector. That’s absurd.”

Mr Soros outlined how the problems that caused the Eurozone economic crisis remain largely unresolved.

“Very little has been done to correct the excess leverage in the European banking system. The equity in the banks relative to their balance sheets is wafer thin, and that makes them very vulnerable. The issue of “too big to fail” has not been solved at all.”

I don’t recall Mr. Soros opposing the 2008 banking bailout. It’s not as if the intrinsically parasitical nature of the finance industry is news to anyone of Mr. Soros’s stature and occupation. No economy can expect to grow as long as a significant percentage of the profits produced are skimmed by the monetary middlemen, for the obvious reason that the middlemen produce nothing.

Why Putin invaded

It’s not too hard to understand once you realize that the anti-democratic coup in Ukraine had nothing to do with the Ukrainian people.

Arseniy Yatseniuk; born May 22, 1974 is a Ukrainian politician,
economist and lawyer who is the Prime Minister of Ukraine following the
parliament’s 2014 removal of Viktor Yanukovych from power. He was born to in a family of
Jewish-Ukrainian professors of the Chernivtsi University.  From September until November 2001, Arseniy served as an “acting” Minister of Economy of Crimea, and from November of the same year until January 2003, served as the official Minister of Economy of the Autonomous Republic of Crimea.

From November 2003 to February 2005, Yatsenyuk served as the first vice-president of the head of the National Bank of Ukraine under Serhiy Tyhypko. After Tyhypko left the National Bank, Arseniy Yatsenyuk was put in charge of the National Bank.

This is as if Obama was chased from the White House after a few weeks of demonstrations and it was announced that Alan Greenspan was now the president. This marks the second time in two years that a banker has been placed directly in power without being elected, first Italy and now Ukraine.

Well, this should end well. We all know how Eastern Europeans just love rich unelected Jews ruling over them. (Yatseniuk is actually Greek Orthodox, however.) I don’t know Russian or Ukrainian history well enough to know if this is supposed to be revenge for the pogroms or the sort of madness that led to the pogroms in the first place.

“So, everybody buckled?”

Asked the Fed. “All right, then, let’s do this thing!”

Goldman Sachs, JPMorgan and Citigroup are among the banks that have successfully completed trial runs using their own models to assess risk and capital requirements. The announcement by the Federal Reserve and the Office of the Comptroller of the Currency on Friday gives those banks clarity on what methods they can use to calculate their capital requirements.

During the trial run, banks had to show they could comply with a more tailored approach to meeting capital requirements for four consecutive calendar quarters before they could officially rely on that method.

The Fed announced that eight bank holding companies, eight national banks, and four state member banks had satisfactory trials, ending a more than five-year limbo period for the largest US banks that had been waiting to hear the results.

In other words, they’ve been getting ready. Now they’re all just about ready. For what, one might wonder?

The bassline thickens

Have we approached the point of statistical unlikelihood yet?

Yet another banker has committed suicide, with a JP Morgan forex trader leaping to his death from the top of the firm’s Chater House headquarters in Hong Kong.

Over the past few weeks at least seven bankers have died under mysterious circumstances, including another JP Morgan senior manager who jumped off the top of a skyscraper in London last month.

Speculation is rife that the series of deaths are connected to some kind of looming financial crisis or a huge legal case targeting bankers for malfeasance, although no definite link has been established.

Not that I’m any fan of bankers, but this is getting a little weird. Especially the suicide by nail gun.

Dum-dum-dum

And another one’s down:

Ordinarily we would ignore the news of another banker’s death – after all these sad events happen all the time – if it wasn’t for several contextual aspects of this most recent passage. First, the death in question, as reported by the Stamford Daily Voice is that of Ryan Henry Crane, a Harvard graduate, who is survived by his wife, son and parents at the very young age of 37. Second, Ryan Henry Crane was formerly employed by JPMorgan – a bank which was featured prominently in the news as recently as two weeks ago when another of its London-based employees committed suicide by jumping from the top floor of its Canary Wharf building….The circumstances surrounding his death are scarce, but what is most
notable is that not only is Crane the second very young JPMorgan banker
to pass in recent days, but is also the fourth banker death in under a month.

Curiouser and curiouser….

That makes foursix

This sounds rather like an Arkansas suicide:

The founder and CEO of American Title Services in Centennial was found dead in his home this week, the result of self-inflicted wounds from a nail gun, according to the Arapahoe County coroner.

Richard Talley, 57, and the company he founded in 2001 were under investigation by state insurance regulators at the time of his death late Tuesday, an agency spokesman confirmed Thursday. It was unclear how long the investigation had been ongoing or its primary focus.

A coroner’s spokeswoman Thursday said Talley was found in his garage by a family member who called authorities. They said Talley died from seven or eight self-inflicted wounds from a nail gun fired into his torso and head.

As Zerohedge points out, this “suicide” follows “the jumping deaths of 2 London bankers and a former-Fed economist in the US”. This seems a little strange considering how the financial companies are presently sitting very fat and happy. There have also been two suicides in Switzerland; the CFO of Zurich Insurance and the CEO of Swisscom.

The dark side of income inequality

Republicans, Libertarians, and Any Rand aficionados like to talk about income inequality as if it is an intrinsically socialist concept. And there is some truth to that. Socialists and other distributionists often appeal to income inequality in order to violate private property rights and rob from Peter in order to pay Paula, DaPaul and Pedro. Income equality can be, and has often been used to justify socialism.

However, superior talent, hard work, and luck combined with a capitalist system are not the only source of income inequality. Income inequality also comes from theft, fraud, government corruption and other evils. And that is the very sort of income inequality that is not only indefensible, but is ever bit as problematic economically as it is morally.  Zerohedge explains the dark side of income inequality:

This brings us to the second undesirable and unjustified source of income inequalities, i.e., the creation of money out of thin air, or legal counterfeiting, by central banks. It should be no surprise the growing gap in income inequalities has coincided with the adoption of fiat currencies worldwide. Every dollar the central bank creates benefits the early recipients of the money—the government and the banking sector — at the expense of the late recipients of the money, the wage earners, and the poor. Since the creation of a fiat currency system in 1971, the dollar has lost 82 percent of its value while the banking sector has gone from 4 percent of GDP to well over 10 percent today.

The central bank does not create anything real; neither resources nor goods and services. When it creates money it causes the price of transactions to increase. The original quantity theory of money clearly related money to the price of anything money can buy, including assets. When the central bank creates money, traders, hedge funds and banks — being first in line — benefit from the increased variability and upward trend in asset prices. Also, future contracts and other derivative products on exchange rates or interest rates were unnecessary prior to 1971, since hedging activity was mostly unnecessary. The central bank is responsible for this added risk, variability, and surge in asset prices unjustified by fundamentals.

The banking sector has been able to significantly increase its profits or claims on goods and services. However, more claims held by one sector, which essentially does not create anything of real value, means less claims on real goods and services for everyone else. This is why counterfeiting is illegal. Hence, the central bank has been playing a central role as a “reverse Robin Hood” by increasing the economic pie going to the rich and by slowly sinking the middle class toward poverty.

One need not be a socialist, or oppose capitalism, to oppose the income equality that is the result of theft. With the assistance of the Federal Reserve and Congress, the banks have financially raped the American economy and the American people through fraud and political corruption. A reckoning is overdue. Everything that has been done in the last five years has been done in order to postpone it. And yet, a reckoning is coming nevertheless, because that which cannot continue will not continue. The rich simply cannot consume enough to substitute for more equitable consumption; how many cars can a man drive? In how many homes can a man dwell?