If these rules are what we are applying to all banks to show their healthy and risk, we are in big trouble. We have a global debt problem (too much), in a financial system that requires growth (more debt/credit) to function problem. Pointing out a single institution makes headlines but over all, any large bank is leveraged well beyond their capital base.
We need to de-leverage the financial system. This will relieve pressure on the bank’s balance-sheet so they can get back to there major societal purpose, lending to the public so we can innovate and create jobs and maintain income levels. Overall, they are falling and have been for some time, outside time periods where we had asset bubbles that created artificial growth that was unsustainable. Global governments will need to go through the same process. If you ask, “how did we get here”, my answer would be that when we moved forward with the global bailout programs and not letting institutions fail or restructure with massive write-downs, this is the course we chose going forward.
My prediction is that we will limp along but eventually we will have a number of cascading failures when the math becomes to unsustainable and out of touch with reality. Perception is reality until you do not have the ability to perceive fantasyland. Good luck and prepare yourself.
Bloomberg - It’s no secret that the methods many banks use for calculating capital ratios are a farce, especially at large European lenders. Sometimes the numbers are so over- the-top, all you can really do is sit back and admire the chutzpah.
I love the terminology used these days. “Growth pact“, it makes you feel very happy and forward looking. In reality, we have a “debt pact” and more issuing debt to solve a debt problem, that in the end will fail because basic math tells us this. It is just another tax on the French citizens that they will pay for in higher rates and inflation over time. Wages are stagnant (compared to real inflation) in most developed nations and have been this ways for decades.
The cost of livings goes up and if it isn’t offset then it is in reality a tax. The same thing is happening in my country of America as well. We keep borrowing and issuing debt, this will continue until we mortgage off America or the system crashes and the debt in a large large part is defaulted. It looks like we will need to learn this lesson the hard way as well. We continually believe the experts but fail to realize they have vested interested in keeping the status quo, so they make sure everything we do is considered good and not doing it would be bad.
There is no free lunch, everything has a cost and the longer you put them off, the harder the medicine is when you need to take and the harsher the cure. I hope we wake up soon and start addressing this and get our priorities straight to we can turn over our society to the next generation with a brighter outlook.
Channel News Asia – French President Francois Hollande has proposed a 120 billion euro (US$152 billion) “growth pact” ahead of key talks with eurozone leaders, newspaper Le Journal du Dimanche reported on Sunday.
The is an ambitious project for the BRIC countries that is made up of: Brazil, Russia, India, China and South Africa. They do not discount the efforts and helpfulness of the current World Bank that was setup by the U.S. and allies to help give assistance to lower developed countries that historically have had a very difficult time securing financing for development and infrastructure project that tend to create jobs and higher standards of living for the local population.
In the article, it is cited that the demand for these services are much more great that the availability of funding, this is what is driving the BRICS to formally starting discussing the formation of this bank based on the “World Bank” model. As long as the assistance is given at rates that can be paid back so these nations come out in better shape than before.
Al-Jazeera – The proposal of a development bank is high on the agenda at the summit of the five BRICS bloc nations – Brazil, Russia, India, China and South Africa – starting on Thursday in New Delhi.
Bombshell of a story. Looks like the German Central Bank (Bundesbank) has not audited their gold reserve since 2007, which I will add is when the financial crisis began. The article is a little hard to follow because I had to rely on Google Translate to bring it from German to English. The element that stood out in this article is the fact is that the Federal Reserve Bank of New York does not allow any photos or tours of the facility, but they do send you a “picture” of your gold. That picture only goes the Central Bank.
Being the huge lapse in auditing, a financial meltdown, I can understand why some of the people would be upset. Psychologically is must mean a lot to the German people to know that their reserve wealth is safe and accounted for. Especially because they have basically been underwriting this whole EU bailout. I think we will see the rectified in the next few weeks. Most likely just an oversight, hopefully.
Text from Google Translate Link:
Looks like Greece and cocked the hammer. They are putting the feet of private investors in Greece to the proverbial fire. Basically they are telling this group of investors to “take the deal” or we will pull the trigger and default. This would create contagion and they know it. The investors most likely will take the deal because they already are bailed out in the fact they made loans to a country that could not afford to service them along with having very rich social service programs that would take a very productive economy to support.
There is no easy answer to this problem in Greece and this is not a new problem with them having a large amount of social entitlement programs. I am hopeful their transition will be successful in the end and hopefully it will give a new perspective on the next generation about what they should expect from their government and what they should expect from themselves and the associated communities.
CBS - Greece stepped up the pressure on its private creditors Tuesday to sign on to a crucial bond swap without which the country will default on its debts this month, but which some investors fear may prove unsuccessful.