Truth to power (listen up)

June 5, 2012 by · Leave a Comment
Filed under: Opinion 

Basically I want to encourage you to navigate over to Marker Ticker by Karl Denninger.   You need to listen to the latest podcast called “Europe and China near detonation“.

There is a quote in this podcast from a CNBC show that occurred Monday.  A representative from Egan-Jones per Karl’s account, was being drilled by questions on Europe and there ability to issue money & credit to shore up their finances.   He shot back with this bombshell of truth to power.

When you emit credit in excess of GDP growth, you make creditors poorer.”   This is what we are doing in America and this is a core issue I have been pounding the table about for years now.  But here is the rub, WE ARE THE ULTIMATE CREDITORS.   He made the other wonderful and true point that most the money in our system is credit (ie: debt) and where is most of this generated??  Two words…. Commercial Banks.

Before I continue, I want to be clear, I have no issue with the concept of banks and I believe and a fair and regulated market.  The problem I have is that we have literally given over this most crucial power of government over to the Federal Reserve which is basically a cartel of most the banks in the United States.    That is not even the biggest problem, the biggest problem is that we allow this system to operate on a debt basis (treasuries to get dollars) AND on a fractional reserve basis.

This is why we are under the un-escapable sucking power of all this debt in the system, and why you allows hear we “have to grow” and “deflation is bad”.  These are bad because it would hurt the holders of assets priced in a currency that is be inflated daily.

The major portion of this credit creation is through loans via the commercial banks.  If you have real reserve requirements, it would be a real check against this unbridled debt creation we have happening now.  We will have a breaking point and it will be much sooner than later.

We need to flush all the bad credit out of the system and put into receivership, any institutions that are deem insolvent.  It is just absurd we have allow some of these banks hold derivatives in such excess that they are more that annual GDPs of major countries.  What is really happening is these derivatives just represent bad bets that are being rolled over at our expense so the some of these banks can not take the hit.   I want us back in an era of prudence and real market forces with government regulation that maintain the fairness of markets to keep the game of life fun.

Currently, we are just spending ourselves into perpetual debt and lowering our standard of living, while forcing people that did not have as many opportunities as others into difference forms of government assistance.  This is not how I want to see people living and I think most people would like to have more opportunity to better themselves and to make sure rules are enforced and are fair.   Under that scenario we can then look for prudent way to extend assistance in ways that are either absolutely necessary because we are a society of compassion or in area to help people that are working to help themselves.  We need this so we can get our optimism back.

Please do something, call your representative, comment below or read some books and get more understanding.   It is almost certain we are going to have it get real bad before we take enough pain and hardship to change this disconnected culture we are generating.   People need to wake up, know there is not free lunch and yes, you need to make time in your business life to engage in politics so you voice can be heard, and please, educate your opinion so its actually worthwhile.

 

 

Federal Reserve’s James Bullard: Break-up JPMorgan and other large banks

May 21, 2012 by · Leave a Comment
Filed under: Opinion 

Sounds like its “Ma Bell” time for the large banks.    Back in the 1980’s the government found that AT&T in its current form as the the nations only carrier was too big and it hampered innovation and competition.  As a result, they split up the carrier into seven smaller regional carriers that had to compete.   This over the long run was very effective in creating a marketplace that bought more choice to consumers and opened the way for more businesses to spring up to serve this more open market.

Breaking up these large financial institutions into smaller pieces would do the things like reduce risk on the FDIC in the event of insolvency.  It would also create the ability for boutique firms to be created to do some of the specialized services that the national banks could do under one roof.  Overall it will be good for the consumers to not have as much concentration of capital and wealth in so few places, we already have the Federal Reserve System in place and that is the largest concentration of capital on behalf of the United States government, we don’t need more.  I want more local and regional banking and if you need international banking then you can go to places like New York or Los Angeles for banking firms that handle those type of services.

The point I read about defending large banking institutions is that they need this size to be competitive globally.    My question would be what size is big enough?    Why as a society should we under-write a blank check on the size they can get.   The only thing I see this size helps with is the large pile of derivatives that are at such large numbers is really looks like they are being using as some of of manner of “hiding” risk and or losses on “bets”.   I believe we are going to see a real investigation into the banks and what is going on under the skirt.    Popular support is building and as more knowledge on the financial industries inner workings come to light, more questions are going to be asked by the common man and the rising to the top until our representatives can ignore these question no longer.    This is healthy and long overdue.

Money News: Another Federal Reserve policymaker on Thursday called for the break-up of big banks like JPMorgan Chase & Co., saying that firm’s recent large trading loss underscores the difficulty of regulating such banks and the dangers they pose.

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Ex-Citigroup CEO Sandy Weill “just wants to move on”

May 9, 2012 by · Leave a Comment
Filed under: Opinion 

Forbes has an interesting interview with the former top boss at Citigroup.  You can read through the interview yourself and make up your own mind.   There are a few quotes I would like to respond to directly to give you my opinion on the matter.   Frankly, I thank Mr. Weill for not softening the corners and giving it to us straight as to his opinion on of global financial crisis

Quote #1 (with question)

How do you think America’s biggest banks have recovered from the financial crisis?

I think the banks are in very good shape right now. I don’t like the new financial regulations. What bothers me the most is I think that banks could be controlled or managed by having good regulations and by having more transparency. I think this whole concept of fixing ‘too big to fail’ is a problem because when you create an environment where you can’t make a mistake then you’re also creating an environment where nothing good is going to happen.

My Response:

A mistake is different then taking obviously junk residential real estate loans (sub-prime), getting insurance (CDS) from companies without the capital to back up losses, calling it AAA, selling it to anyone who would buy it.   Yes there were major mistakes made in this process but even in the policy makers put the perverse incentives in place, the banks had a responsibility as the guardian of capital to not be reckless and to use the old adage, “when the music plays, dance.”

Quote #2 (with question)

But a lot of Americans blame lax regulations and the big banks for the financial crisis. What would you say to them?

I would say there is enough blame to go around. I think that the financial industry made some mistakes that created issues, our government made mistakes that created issues, the regulators made mistakes that created issues. People made mistakes that created issues.

Lots of people were at fault. I think we want to move on. There comes a time when you stop punishing people and ask how do we build this back in a way that’s going to be safer for the future? We should concentrate on the future and positive thinking.

My Response:

I agree with the last part on having a future bias and positive thinking.   BUT  To say we need to “stop punishing people” would only make sense if we were actually punishing people.  Think to yourself  after the largest financial crisis in the history of the planet, who has been punished that had a major influence on the crisis while it was building up???  Not only have we not punished much of anyone, all the major banks have settle out of courts without guilt on pretty much textbook fraud and or misrepresentations.   We also have drug our feet so long that the statue of limitations have run out on many of these potential cases.  Mr. Weill, don’t worry, we have moved on technically.  After the S&L crisis have read about of at least 700 people (conservative estimate) that went to jail because of that fraud.

Here it the full interview, post comments to weigh in to agree or not and I will approve them so we can see where people stand on these opinions.

Response to Goldman CEO Lloyd Blankfein’s Bloomberg TV interview

April 26, 2012 by · Leave a Comment
Filed under: Opinion 

This is not pointed at Goldman Sachs per say or Lloyd directly.   I do feel that we treat grey areas in business endeavors as morally okay just because we may not have adapted with rules to prevent overt exploitation.   This comment is not about that.

I do have to say that Mr. Blankfein should not of done that interview yesterday on Bloomberg TV, and with no surprise, is really hard to find at the moment.     It applaud him at least trying to explain some of the firms culture, objectives and mis-steps.

BUT, BUT, dear sir.

Lloyd through out the duration of this interview, gave THE MOST convincing argument for the FULL re-reinstatement of the Glass-Steagall Act we have had to date in my humble but serious opinion.

In effect he said that “when you invest for a customer (client) and LEND to them, “Ah-Ha”, you now have an INTEREST in the outcome of any given transaction.  You are absolutely correct in your analysis of the nature of these types of transactions.

But this is also one of the major reason for Glass-Steagall.  It separated the deposit taking commercial banking side that lends money from the investment banking side that invests it and give advice.  The most he gave us on if this what a good idea what that he said “he felt” that the world needed companies like this to be competitive today.

I would respond with, that type of competition sounds pretty ruinous if we are at a point where our advice givers have to play both sides AND lend to be competitive.  Yes we are in a world of constant competition but that does mean that we need to throw objectivity and real integrity over-board to compete.

What really has happened is that Goldman Sachs is now a public company that has a long and vaulted history with major expectations from not only stock-holders but also historians to continue to live up to this past.  To do this they have needed every advantage and inside connection to continue this miracle (they can be good and bad).

I believe when we are at a point where we need to compromise our integrity of our business to meet the “challenges of our current global landscape” we really need to reevaluate what our priorities are.

Money is not an end in itself, just a very useful tool to give you opportunities in life.   I agree with have a some what fair market system with the most important purpose to provide opportunity and general betterment to all people.  If we miss this important point then we are missing the whole point.   If you think this system is instead for the chance of being one of the few people who get to live lifestyles that are written and talked about then you have been captured and fully mis-guided.

I am not advocating any sort of full equality because we are all given different talents and traits but YES SIR, there is too poor and to ignore that means you have lost some of your own humanity.  I just want a fair game that provides basic opportunity to all who participates and from there we will see where the chips will fall.   Instead of attacking capital and wealth I would rather come up with creative ways of providing incentives for wealth to help provide more opportunity.   It is a truly win-win.

Here is the best I could find so you could watch the interview.  I think it will be increasingly hard to find it in full length.

Link (Bloomberg Videos)

Fed’s Williams: Essential to keep monetary stimulus in place

April 5, 2012 by · Leave a Comment
Filed under: Opinion 

He is right.  We do need to continue to keep aggressive polices in place to support this recovery.  I appreciate the amount of honesty I am read and watching as of late.  The only problem is that is underlines how precarious of a position we are in, not just the United States but globally.  We are now fully inter-connected and dependent on one another.   After reading this article, I wonder if Mr. Williams included the U.S. as one of the countries that has “unsustainable debt levels” and have not been resolved?

WSJ – It is essential for the Federal Reserve to provide strong stimulus to the economy under current economic circumstances, a top central banker plans to say Wednesday.

“It’s essential that we keep strong monetary stimulus in place,” John Williams, president of the Federal Reserve Bank of San Francisco, is scheduled to say, according to the text of a speech to be delivered as part of the SPUR Business Breakfast Series in San Francisco.

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