The idea that the United States is on the brink of a horrifying economic crash is absolutely inconceivable to most Americans. After all, the economy has been relatively stable for quite a few years and the stock market continues to surge to new heights. On Friday, the Dow and the S&P 500 both closed at brand new all-time record highs. For the year, the S&P 500 is now up 9 percent and the Nasdaq is now up close to 11 percent. And American consumers are getting ready to spend more than 600 billion dollars this Christmas season. That is an amount of money that is larger than the entire economy of Sweden. So how in the world can anyone be talking about economic collapse? Yes, many will concede, we had a few bumps in the road back in 2008 but things have pretty much gotten back to normal since then. Why be concerned about economic collapse when there is so much stability all around us?
Unfortunately, this brief period of stability that we have been enjoying is just an illusion.
The fundamental problems that caused the financial crisis of 2008 have not been fixed. In fact, most of our long-term economic problems have gotten even worse.
But most Americans have such short attention spans these days. In a world where we are accustomed to getting everything instantly, news cycles only last for 48 hours and 2008 might as well be an eternity ago.
In the United States today, our entire economic system is based on debt.
Without debt, very little economic activity happens. We need mortgages to buy our homes, we need auto loans to buy our vehicles and we need our credit cards to do our shopping during the holiday season.
So where does all of that debt come from?
It comes from the banks.
In particular, the “too big to fail banks” are the heart of this debt-based system.
Do you have a mortgage, an auto loan or a credit card from one of these “too big to fail” institutions? A very large percentage of the people that will read this article do.
And a lot of people might not like to hear this, but without those banks we essentially do not have an economy.
When Lehman Brothers collapsed in 2008, it almost resulted in the meltdown of our entire system. The stock market collapsed and we experienced an absolutely wicked credit crunch.
Unfortunately, that was just a small preview of what is coming.
Even though a few prominent “experts” such as New York Times columnist Paul Krugman have declared that the “too big to fail” problem is “over”, the truth is that it is now a bigger crisis than ever before.
Compared to five years ago, the four largest banks in the country are now almost 40 percent larger. The following numbers come from a recent article in the Los Angeles Times…
Just before the financial crisis hit, Wells Fargo & Co. had $609 billion in assets. Now it has $1.4 trillion. Bank of America Corp. had $1.7 trillion in assets. That’s up to $2.1 trillion.
And the assets of JPMorgan Chase & Co., the nation’s biggest bank, have ballooned to $2.4 trillion from $1.8 trillion.
At the same time that those banks have been getting bigger, 1,400 smaller banks have completely disappeared from the banking industry.
That means that we are now more dependent on these gigantic banks than ever.
At this point, the five largest banks account for 42 percent of all loans in the United States, and the six largest banks account for 67 percent of all assets in our financial system.
If someone came along and zapped those banks out of existence, our economy would totally collapse overnight.
So the health of this handful of immensely powerful banking institutions is absolutely critical to our economy.
Unfortunately, these banks have become deeply addicted to gambling.
Have you ever known people that allowed their lives to be destroyed by addictions that they could never shake?
Well, that is what is happening to these banks. They have transformed Wall Street into the largest casino in the history of the world. Most of the time, their bets pay off and they make lots of money.
But as we saw back in 2008, when they miscalculate things can fall apart very rapidly.
The bets that I am most concerned about are known as “derivatives“. In essence, they are bets about what will or will not happen in the future. The big banks use very sophisticated algorithms that are supposed to help them be on the winning side of these bets the vast majority of the time, but these algorithms are not perfect. The reason these algorithms are not perfect is because they are based on assumptions, and those assumptions come from people. They might be really smart people, but they are still just people.
If things stay fairly stable like they have the past few years, the algorithms tend to work very well.
But if there is a “black swan event” such as a major stock market crash, a collapse of European or Asian banks, a historic shift in interest rates, an Ebola pandemic, a horrific natural disaster or a massive EMP blast is unleashed by the sun, everything can be suddenly thrown out of balance.
Acrobat Nik Wallenda has been making headlines all over the world for crossing vast distances on a high-wire without a safety net. Well, that is essentially what our “too big to fail” banks are doing every single day. With each passing year, these banks have become even more reckless, and so far there have not been any serious consequences.
But without a doubt, someday there will be.
What would you say about a bookie that took $200,000 in bets but that only had $10,000 to cover those bets?
You would certainly call that bookie a fool.
But that is what our big banks are doing.
Right now, JPMorgan Chase has more than 67 trillion dollars in exposure to derivatives but it only has 2.5 trillion dollars in assets.
Right now, Citibank has nearly 60 trillion dollars in exposure to derivatives but it only has 1.9 trillion dollars in assets.
Right now, Goldman Sachs has more than 54 trillion dollars in exposure to derivatives but it has less than a trillion dollars in assets.
Right now, Bank of America has more than 54 trillion dollars in exposure to derivatives but it only has 2.2 trillion dollars in assets.
Right now, Morgan Stanley has more than 44 trillion dollars in exposure to derivatives but it has less than a trillion dollars in assets.
Most people have absolutely no idea how incredibly vulnerable our financial system really is.
The truth is that these “too big to fail” banks could collapse at any time.
And when they fail, our economy will fail too.
So let us hope and pray that this brief period of false stability lasts for as long as possible.
Because when it ends, all hell is going to break loose.
When is the U.S. banking system going to crash? I can sum it up in three words. Watch the derivatives. It used to be only four, but now there are five “too big to fail” banks in the United States that each have more than 40 trillion dollars in exposure to derivatives. Today, the U.S. national debt is sitting at a grand total of about 17.7 trillion dollars, so when we are talking about 40 trillion dollars we are talking about an amount of money that is almost unimaginable. And unlike stocks and bonds, these derivatives do not represent “investments” in anything. They can be incredibly complex, but essentially they are just paper wagers about what will happen in the future. The truth is that derivatives trading is not too different from betting on baseball or football games. Trading in derivatives is basically just a form of legalized gambling, and the “too big to fail” banks have transformed Wall Street into the largest casino in the history of the planet. When this derivatives bubble bursts (and as surely as I am writing this it will), the pain that it will cause the global economy will be greater than words can describe.
If derivatives trading is so risky, then why do our big banks do it?
The answer to that question comes down to just one thing.
The “too big to fail” banks run up enormous profits from their derivatives trading. According to the New York Times, U.S. banks “have nearly $280 trillion of derivatives on their books” even though the financial crisis of 2008 demonstrated how dangerous they could be…
American banks have nearly $280 trillion of derivatives on their books, and they earn some of their biggest profits from trading in them. But the 2008 crisis revealed how flaws in the market had allowed for dangerous buildups of risk at large Wall Street firms and worsened the run on the banking system.
The big banks have sophisticated computer models which are supposed to keep the system stable and help them manage these risks.
But all computer models are based on assumptions.
And all of those assumptions were originally made by flesh and blood people.
When a “black swan event” comes along such as a war, a major pandemic, an apocalyptic natural disaster or a collapse of a very large financial institution, these models can often break down very rapidly.
For example, the following is a brief excerpt from a Forbes article that describes what happened to the derivatives market when Lehman Brothers collapsed back in 2008…
Fast forward to the financial meltdown of 2008 and what do we see? America again was celebrating. The economy was booming. Everyone seemed to be getting wealthier, even though the warning signs were everywhere: too much borrowing, foolish investments, greedy banks, regulators asleep at the wheel, politicians eager to promote home-ownership for those who couldn’t afford it, and distinguished analysts openly predicting this could only end badly. And then, when Lehman Bros fell, the financial system froze and world economy almost collapsed. Why?
The root cause wasn’t just the reckless lending and the excessive risk taking. The problem at the core was a lack of transparency. After Lehman’s collapse, no one could understand any particular bank’s risks from derivative trading and so no bank wanted to lend to or trade with any other bank. Because all the big banks’ had been involved to an unknown degree in risky derivative trading, no one could tell whether any particular financial institution might suddenly implode.
After the last financial crisis, we were promised that this would be fixed.
But instead the problem has become much larger.
When the housing bubble burst back in 2007, the total notional value of derivatives contracts around the world had risen to about 500 trillion dollars.
According to the Bank for International Settlements, today the total notional value of derivatives contracts around the world has ballooned to a staggering 710 trillion dollars ($710,000,000,000,000).
And of course the heart of this derivatives bubble can be found on Wall Street.
What I am about to share with you is very troubling information.
I have shared similar numbers in the past, but for this article I went and got the very latest numbers from the OCC’s most recent quarterly report. As I mentioned above, there are now five “too big to fail” banks that each have more than 40 trillion dollars in exposure to derivatives…
Total Assets: $2,476,986,000,000 (about 2.5 trillion dollars)
Total Exposure To Derivatives: $67,951,190,000,000 (more than 67 trillion dollars)
Total Assets: $1,894,736,000,000 (almost 1.9 trillion dollars)
Total Exposure To Derivatives: $59,944,502,000,000 (nearly 60 trillion dollars)
Total Assets: $915,705,000,000 (less than a trillion dollars)
Total Exposure To Derivatives: $54,564,516,000,000 (more than 54 trillion dollars)
Bank Of America
Total Assets: $2,152,533,000,000 (a bit more than 2.1 trillion dollars)
Total Exposure To Derivatives: $54,457,605,000,000 (more than 54 trillion dollars)
Total Assets: $831,381,000,000 (less than a trillion dollars)
Total Exposure To Derivatives: $44,946,153,000,000 (more than 44 trillion dollars)
And it isn’t just U.S. banks that are engaged in this type of behavior.
As Zero Hedge recently detailed, German banking giant Deutsche Bank has more exposure to derivatives than any of the American banks listed above…
Deutsche has a total derivative exposure that amounts to €55 trillion or just about $75 trillion. That’s a trillion with a T, and is about 100 times greater than the €522 billion in deposits the bank has. It is also 5x greater than the GDP of Europe and more or less the same as the GDP of… the world.
For those looking forward to the day when these mammoth banks will collapse, you need to keep in mind that when they do go down the entire system is going to utterly fall apart.
At this point our economic system is so completely dependent on these banks that there is no way that it can function without them.
It is like a patient with an extremely advanced case of cancer.
Doctors can try to kill the cancer, but it is almost inevitable that the patient will die in the process.
The same thing could be said about our relationship with the “too big to fail” banks. If they fail, so do the rest of us.
We were told that something would be done about the “too big to fail” problem after the last crisis, but it never happened.
In fact, as I have written about previously, the “too big to fail” banks have collectively gotten 37 percent larger since the last recession.
At this point, the five largest banks in the country account for 42 percent of all loans in the United States, and the six largest banks control 67 percent of all banking assets.
If those banks were to disappear tomorrow, we would not have much of an economy left.
But as you have just read about in this article, they are being more reckless than ever before.
We are steamrolling toward the greatest financial disaster in world history, and nobody is doing much of anything to stop it.
Things could have turned out very differently, but now we will reap the consequences for the very foolish decisions that we have made.
Wall Street banks are getting hit by cyber attacks every single minute of every single day. It is a massive onslaught that is not highly publicized because the bankers do not want to alarm the public. But as you will see below, one big Wall Street bank is spending 250 million dollars a year just by themselves to combat this growing problem. The truth is that our financial system is not nearly as stable as most Americans think that it is. We have become more dependent on technology than ever before, and that comes with a potentially huge downside. An electromagnetic pulse weapon or an incredibly massive cyberattack could conceivably take down part or all of our banking system at any time.
This week, the mainstream news is reporting on an attack on our major banks that was so massive that the FBI and the Secret Service have decided to get involved. The following is how Forbes described what is going on…
The FBI and the Secret Service are investigating a huge wave of cyber attacks on Wall Street banks, reportedly including JP Morgan Chase, that took place in recent weeks.
The attacks may have involved the theft of multiple gigabytes of sensitive data, according to reports. Joshua Campbell, supervisory special agent at the FBI, tells Forbes: “We are working with the United States Secret Service to determine the scope of recently reported cyber attacks against several American financial institutions.”
When most people think of “cyber attacks”, they think of a handful of hackers working out of lonely apartments or the basements of their parents. But that is not primarily what we are dealing with anymore. Today, big banks are dealing with cyberattackers that are extremely organized and that are incredibly sophisticated.
The threat grows with each passing day, and that is why JPMorgan Chase says that “not every battle will be won” even though it is spending 250 million dollars a year in a relentless fight against cyberattacks…
JPMorgan Chase this year will spend $250 million and dedicate 1,000 people to protecting itself from cybercrime — and it still might not be completely successful, CEO Jamie Dimon warned in April.
“Cyberattacks are growing every day in strength and velocity across the globe. It is going to be continual and likely never-ending battle to stay ahead of it — and, unfortunately, not every battle will be won,” Dimon said in his annual letter to shareholders.
Other big Wall Street banks have a similar perspective. Just consider the following two quotes from a recent USA Today article…
Bank of America: “Although to date we have not experienced any material losses relating to cyber attacks or other information security breaches, there can be no assurance that we will not suffer such losses in the future.”
Citigroup: “Citi has been subject to intentional cyber incidents from external sources, including (i) denial of service attacks, which attempted to interrupt service to clients and customers; (ii) data breaches, which aimed to obtain unauthorized access to customer account data; and (iii) malicious software attacks on client systems, which attempted to allow unauthorized entrance to Citi’s systems under the guise of a client and the extraction of client data. For example, in 2013 Citi and other U.S. financial institutions experienced distributed denial of service attacks which were intended to disrupt consumer online banking services. …
“… because the methods used to cause cyber attacks change frequently or, in some cases, are not recognized until launched, Citi may be unable to implement effective preventive measures or proactively address these methods.”
I don’t know about you, but those quotes do not exactly fill me with confidence.
Another potential threat that banking executives lose sleep over is the threat of electromagnetic pulse weapons. The technology of these weapons has advanced so much that they can fit inside a briefcase now. Just consider the following excerpt from an article that was posted on an engineering website entitled “Electromagnetic Warfare Is Here“…
The problem is growing because the technology available to attackers has improved even as the technology being attacked has become more vulnerable. Our infrastructure increasingly depends on closely integrated, high-speed electronic systems operating at low internal voltages. That means they can be laid low by short, sharp pulses high in voltage but low in energy—output that can now be generated by a machine the size of a suitcase, batteries included.
Electromagnetic (EM) attacks are not only possible—they are happening. One may be under way as you read this. Even so, you would probably never hear of it: These stories are typically hushed up, for the sake of security or the victims’ reputation.
That same article described how an attack might possibly happen…
An attack might be staged as follows. A larger electromagnetic weapon could be hidden in a small van with side panels made of fiberglass, which is transparent to EM radiation. If the van is parked about 5 to 10 meters away from the target, the EM fields propagating to the wall of the building can be very high. If, as is usually the case, the walls are mere masonry, without metal shielding, the fields will attenuate only slightly. You can tell just how well shielded a building is by a simple test: If your cellphone works well when you’re inside, then you are probably wide open to attack.
And with electromagnetic pulse weapons, terrorists or cyberattackers can try again and again until they finally get it right…
And, unlike other means of attack, EM weapons can be used without much risk. A terrorist gang can be caught at the gates, and a hacker may raise alarms while attempting to slip through the firewalls, but an EM attacker can try and try again, and no one will notice until computer systems begin to fail (and even then the victims may still not know why).
Never before have our financial institutions faced potential threats on this scale.
According to the Telegraph, our banks are under assault from cyberattacks “every minute of every day”, and these attacks are continually growing in size and scope…
Every minute, of every hour, of every day, a major financial institution is under attack.
Threats range from teenagers in their bedrooms engaging in adolescent “hacktivism”, to sophisticated criminal gangs and state-sponsored terrorists attempting everything from extortion to industrial espionage. Though the details of these crimes remain scant, cyber security experts are clear that behind-the-scenes online attacks have already had far reaching consequences for banks and the financial markets.
In the end, it is probably only a matter of time until we experience a technological 9/11.
When that day arrives, will your money be safe?
Most people have never heard of Jaime Caruana even though he is the head of an immensely powerful organization. He has been serving as the General Manager of the Bank for International Settlements since 2009, and he will continue in that role until 2017. The Bank for International Settlements is a rather boring name, and very few people realize that it is at the very core of our centrally-planned global financial system. So when Jaime Caruana speaks, people should listen. And the fact that he recently warned that the global financial system is currently “more fragile” in many ways than it was just prior to the collapse of Lehman Brothers should set off all sorts of alarm bells. Speaking of the financial markets, Caruana ominously declared that “it is hard to avoid the sense of a puzzling disconnect between the markets’ buoyancy and underlying economic developments globally” and he noted that “markets can stay irrational longer than you can stay solvent”. In other words, he is saying what I have been saying for so long. The behavior of the financial markets has become completely divorced from economic reality, and at some point there is going to be a massive correction.
So why would the head of ‘the central bank of the world’ choose this moment to issue such a chilling warning?
Does he know something that the rest of us do not?
According to a recent article in the Telegraph by Ambrose Evans-Pritchard, Caruana is extremely concerned about rising debt levels and the current level of euphoria in the financial markets…
The world economy is just as vulnerable to a financial crisis as it was in 2007, with the added danger that debt ratios are now far higher and emerging markets have been drawn into the fire as well, the Bank for International Settlements has warned.
Jaime Caruana, head of the Swiss-based financial watchdog, said investors were ignoring the risk of monetary tightening in their voracious hunt for yield.
“Markets seem to be considering only a very narrow spectrum of potential outcomes. They have become convinced that monetary conditions will remain easy for a very long time, and may be taking more assurance than central banks wish to give,” he told The Telegraph.
Mr Caruana said the international system is in many ways more fragile than it was in the build-up to the Lehman crisis. Debt ratios in the developed economies have risen by 20 percentage points to 275pc of GDP since then.
And you know what?
Caruana is certainly correct to be warning us about these things.
As I have written about previously, the total amount of government debt in the world has grown by about 40 percent since the last recession, and the “too big to fail banks” have collectively gotten 37 percent larger since that time.
The U.S. national debt has grown from about 10 trillion dollars to more than 17.5 trillion dollars, and even the Bank for International Settlements admits that the global derivatives bubble has grown to at least 710 trillion dollars.
The massive financial imbalances that we were facing during the last crisis have not been fixed. Instead, they have gotten much, much worse.
But should we trust the Bank for International Settlements?
Of course not.
This is a very secretive organization that very few people know about but that possesses absolutely enormous power. The following is a brief overview of the Bank for International Settlements from one of my previous articles entitled “Who Controls The Money? An Unelected, Unaccountable Central Bank Of The World Secretly Does“…
An immensely powerful international organization that most people have never even heard of secretly controls the money supply of the entire globe. It is called the Bank for International Settlements, and it is the central bank of central banks. It is located in Basel, Switzerland, but it also has branches in Hong Kong and Mexico City. It is essentially an unelected, unaccountable central bank of the world that has complete immunity from taxation and from national laws. Even Wikipedia admits that “it is not accountable to any single national government.” The Bank for International Settlements was used to launder money for the Nazis during World War II, but these days the main purpose of the BIS is to guide and direct the centrally-planned global financial system. Today, 58 global central banks belong to the BIS, and it has far more power over how the U.S. economy (or any other economy for that matter) will perform over the course of the next year than any politician does. Every two months, the central bankers of the world gather in Basel for another “Global Economy Meeting”. During those meetings, decisions are made which affect every man, woman and child on the planet, and yet none of us have any say in what goes on. The Bank for International Settlements is an organization that was founded by the global elite and it operates for the benefit of the global elite, and it is intended to be one of the key cornerstones of the emerging one world economic system.
The role that the Bank for International Settlements is playing today was envisioned by the global elite long ago. In another previous article, I quoted from a book that Georgetown University history professor Carroll Quigley wrote in 1975 entitled “Tragedy & Hope” in which he discussed how the BIS was to one day become “the apex” of the global financial system…
[T]he powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent private meetings and conferences. The apex of the system was to be the Bank for International Settlements in Basle, Switzerland, a private bank owned and controlled by the world’s central banks which were themselves private corporations.
And it is interesting to note that Professor Quigley was not against the system that the elite were setting up. He was just an academic that was trying to accurately convey what he had learned about how the global system works.
Sadly, the system that Quigley wrote about all the way back in 1975 has fully blossomed today.
Every two months, the central bankers of the world travel to Switzerland for “Global Economy Meetings” in Basel. Most people have never heard of them, but these Global Economy Meetings were actually discussed in the Wall Street Journal…
Every two months, more than a dozen bankers meet here on Sunday evenings to talk and dine on the 18th floor of a cylindrical building looking out on the Rhine.
The dinner discussions on money and economics are more than academic. At the table are the chiefs of the world’s biggest central banks, representing countries that annually produce more than $51 trillion of gross domestic product, three-quarters of the world’s economic output.
So how do you feel about the fact that the central bankers of the world regularly gather to plot their next moves for the global economy?
Should an unelected group of central bankers that has no accountability to any national government really have so much power?
Please feel free to share what you think by posting a comment below…
Do you have a bank account that you don’t actively use or a safe deposit box that you have not checked on for a while? If so, you might want to see if the government has grabbed your money. This sounds absolutely crazy, but it is true. All over the world, governments are shortening the time periods required before they can seize “dormant bank accounts” and “unclaimed property”. For example, as you will read about below, just last year the government of Australia seized a whopping 360 million dollars from dormant bank accounts. And this kind of thing is going on all over America as well. In fact, all 50 states actually pay private contractors to locate bank accounts and unclaimed property that can be seized. In some states, no effort will be made to contact you when your property is confiscated. And in most states, the seized property permanently become the property of the state government after a certain waiting period has elapsed. So please don’t put money or property into a bank somewhere and just let it sit there. If you do, the government may come along and grab it right out from under your nose.
In this day and age, broke governments all over the globe are searching for “creative ways” to raise revenues. In Australia for example, the time period required before the federal government could seize a dormant bank account was reduced from seven to three years, and this resulted in an unprecedented windfall for the Australian government over the past 12 months…
The federal government has seized a record $360 million from household bank accounts that have been dormant for just three years, prompting outrage in some quarters amid complaints that pensioners and retirees have lost deposits.
Figures from the Australian Security and Investments Commission (ASIC) show almost $360 million was collected from 80,000 inactive accounts in the year to May under new rules introduced by Labor. The new rules lowered the threshold at which the government is allowed to snatch funds from accounts that remain idle from seven years to three years.
The rule change has delivered the government a massive bonanza with the money collected in the year to May more than the total collected in the past five decades combined.
Most Americans are not going to be too concerned about this because it is happening on the other side of the planet.
But did you know that this is happening all over the U.S. as well?
For instance, the waiting period in the state of California used to be fifteen years.
Now it is just three years.
And when California grabs your money they don’t just sit around waiting for you to come and claim it. Instead, it gets dumped directly into the general fund and spent.
If you do not believe that California does this, just check out the following information that comes directly from the official website of the California State Controller’s Office…
The State acquires unclaimed property through California’s Unclaimed Property Law, which requires “holders” such as corporations, business associations, financial institutions, and insurance companies to annually report and deliver property to the Controller’s Office after there has been no customer contact for three years. Often the owner forgets that the account exists, or moves and does not leave a forwarding address or the forwarding order expires. In some cases, the owner dies and the heirs have no knowledge of the property.
And it is not just bank accounts and safe deposit boxes that are covered by California law. The reality is that a vast array of different kinds of “unclaimed property” are covered…
The most common types of Unclaimed Property are:
Bank accounts and safe deposit box contents
Stocks, mutual funds, bonds, and dividends
Uncashed cashier’s checks or money orders
Certificates of deposit
Matured or terminated insurance policies
Mineral interests and royalty payments, trust funds, and escrow accounts.
And when a state government grabs your property, the consequences can be absolutely devastating. The following is an excerpt from an ABC news report from a few years ago…
San Francisco resident Carla Ruff’s safe-deposit box was drilled, seized, and turned over to the state of California, marked “owner unknown.”
“I was appalled,” Ruff said. “I felt violated.”
Unknown? Carla’s name was right on documents in the box at the Noe Valley Bank of America location. So was her address — a house about six blocks from the bank. Carla had a checking account at the bank, too — still does — and receives regular statements. Plus, she has receipts showing she’s the kind of person who paid her box rental fee. And yet, she says nobody ever notified her.
“They are zealously uncovering accounts that are not unclaimed,” Ruff said.
To make matters worse, Ruff discovered the loss when she went to her box to retrieve important paperwork she needed because her husband was dying. Those papers had been shredded.
And that’s not all. Her great-grandmother’s precious natural pearls and other jewelry had been auctioned off. They were sold for just $1,800, even though they were appraised for $82,500.
And some states are even more aggressive than the state of California in going after bank accounts.
In a recent article, Simon Black noted that the state of Georgia can go after “dormant bank accounts” after just one year of inactivity…
In fact, each of the 50 states has its own regulations pertaining to the seizure of dormant accounts. And the grand prize goes to… the great state of Georgia!
Georgia’s Disposition of Unclaimed Properties Act sets the threshold as low as one year.
In other words, if you have a checking account in Georgia that you haven’t touched in twelve months, the state government is going to grab it.
So much for setting aside money for a rainy day and having the discipline to never touch it.
As economic conditions get even worse, the temptation for governments all over the planet to grab private bank accounts is going to become even greater.
We all remember what happened in Cyprus. When the global financial Ponzi scheme finally collapses, politicians all over the world are going to be looking for an easy way to raise cash. And our bank accounts may be one of the first things that they decide to confiscate.
So please don’t keep all of your eggs in one basket, and check on all of your accounts in regular intervals.
In this day and age, it pays to be diligent.
The global derivatives bubble is now 20 percent bigger than it was just before the last great financial crisis struck in 2008. It is a financial bubble far larger than anything the world has ever seen, and when it finally bursts it is going to be a complete and utter nightmare for the financial system of the planet. According to the Bank for International Settlements, the total notional value of derivatives contracts around the world has ballooned to an astounding 710 trillion dollars ($710,000,000,000,000). Other estimates put the grand total well over a quadrillion dollars. If that sounds like a lot of money, that is because it is. For example, U.S. GDP is projected to be in the neighborhood of around 17 trillion dollars for 2014. So 710 trillion dollars is an amount of money that is almost incomprehensible. Instead of actually doing something about the insanely reckless behavior of the big banks, our leaders have allowed the derivatives bubble and these banks to get larger than ever. In fact, as I have written about previously, the big Wall Street banks are collectively 37 percent larger than they were just prior to the last recession. “Too big to fail” is a far more massive problem than it was the last time around, and at some point this derivatives bubble is going to burst and start taking those banks down. When that day arrives, we are going to be facing a crisis that is going to make 2008 look like a Sunday picnic.
If you do not know what a derivative is, Mayra Rodríguez Valladares, a managing principal at MRV Associates, provided a pretty good definition in her recent article for the New York Times…
A derivative, put simply, is a contract between two parties whose value is determined by changes in the value of an underlying asset. Those assets could be bonds, equities, commodities or currencies. The majority of contracts are traded over the counter, where details about pricing, risk measurement and collateral, if any, are not available to the public.
In other words, a derivative does not have any intrinsic value. It is essentially a side bet. Most commonly, derivative contracts have to do with the movement of interest rates. But there are many, many other kinds of derivatives as well. People are betting on just about anything and everything that you can imagine, and Wall Street has been transformed into the largest casino in the history of the planet.
After the last financial crisis, our politicians promised us that they would do something to get derivatives trading under control. But instead, the size of the derivatives bubble has reached a new record high. In the New York Times article I mentioned above, Goldman Sachs and Citibank were singled out as two players that have experienced tremendous growth in this area in recent years…
Goldman Sachs has been increasing its derivatives volumes since the crisis, and it had a portfolio of about $48 trillion at the end of 2013. Bloomberg Businessweek recently reported that as part of its growth strategy, Goldman plans to sell more derivatives to clients. Citibank, too, has been increasing its derivatives portfolio, despite the numerous capital and regulatory challenges, In fact, its portfolio has risen by over 65 percent since the crisis — the most of any of the four banks — to $62 trillion.
According to official government numbers, the top 25 banks in the United States now have a grand total of more than 236 trillion dollars of exposure to derivatives. But there are four banks that dwarf everyone else. The following are the latest numbers for those four banks…
Total Assets: $1,945,467,000,000 (nearly 2 trillion dollars)
Total Exposure To Derivatives: $70,088,625,000,000 (more than 70 trillion dollars)
Total Assets: $1,346,747,000,000 (a bit more than 1.3 trillion dollars)
Total Exposure To Derivatives: $62,247,698,000,000 (more than 62 trillion dollars)
Bank Of America
Total Assets: $1,433,716,000,000 (a bit more than 1.4 trillion dollars)
Total Exposure To Derivatives: $38,850,900,000,000 (more than 38 trillion dollars)
Total Assets: $105,616,000,000 (just a shade over 105 billion dollars – yes, you read that correctly)
Total Exposure To Derivatives: $48,611,684,000,000 (more than 48 trillion dollars)
If the stock market keeps going up, interest rates stay fairly stable and the global economy does not experience a major downturn, this bubble will probably not burst for a while.
But if there is a major shock to the system, we could easily experience a major derivatives crisis very rapidly and several of those banks could fail simultaneously.
There are many out there that would welcome the collapse of the big banks, but that would also be very bad news for the rest of us.
You see, the truth is that the U.S. economy is like a very sick patient with an extremely advanced case of cancer. You can try to kill the cancer (the banks), but in the process you will inevitably kill the patient as well.
Right now, the five largest banks account for 42 percent of all loans in the entire country, and the six largest banks control 67 percent of all banking assets.
If they go down, we go down too.
That is why the fact that they have been so reckless is so infuriating.
Just look at the numbers for Goldman Sachs again. At this point, the total exposure that Goldman Sachs has to derivatives contracts is more than 460 times greater than their total assets.
And this kind of thing is not just happening in the United States. German banking giant Deutsche Bank has more than 75 trillion dollars of exposure to derivatives. That is even more than any single U.S. bank has.
This derivatives bubble is a “sword of Damocles” that is hanging over the global economy by a thread day after day, month after month, year after year.
At some point that thread is going to break, the bubble is going to burst, and then all hell is going to break loose.
You see, the truth is that virtually none of the underlying problems that caused the last financial crisis have been fixed.
Instead, our problems have just gotten even bigger and the financial bubbles have gotten even larger.
Never before in the history of the United States have we been faced with the threat of such a great financial catastrophe.
Sadly, most Americans are totally oblivious to all of this. They just have faith that our leaders know what they are doing, and they have been lulled into complacency by the bubble of false stability that we have been enjoying for the last couple of years.
Unfortunately for them, this bubble of false stability is not going to last much longer.
A financial crisis far greater than what we experienced in 2008 is coming, and it is going to shock the world.
How would you feel if you went to the store to buy something, and someone rushed ahead of you and purchased it first and then sold it to you at a higher price? Well, in the financial world this happens millions upon millions of times. In fact, this practice has become so popular that it has spawned an entire industry known as “high frequency trading”. At this point, high frequency trading makes up about half of all trading volume on Wall Street, and it is costing the rest of us billions of dollars a year. And the funny thing is that this is all perfectly legal. High frequency trading firms are exploiting a glitch in the system, and by allowing this to go on, the authorities have essentially given them a license to steal from the rest of us. Sadly, this is just another example that shows that the odds are never in our favor. The “little guy” never seems to be able to win, and those at the top of the food chain like it that way.
Making money in the stock market is supposed to be about making wise investment decisions. It isn’t supposed to be about finding a glitch in a video game and exploiting it. But that is essentially what these high frequency traders have done. They have spent an extraordinary amount of time and energy figuring out ways to make pennies (or sometimes just fractions of a penny) on the trades that the rest of us make.
Fortunately, this practice was exposed in front of the entire world by 60 Minutes the other night. Steve Kroft interviewed a former trader named Michael Lewis that just released a new book entitled “Flash Boys” that is all about the evils of high frequency trading. The following is an excerpt from that interview…
Steve Kroft: And this is all being done by computers?
Michael Lewis: All being done by computers. It’s too fast to be done by humans. Humans have been completely removed from the marketplace.
“Fast” is the operative word. Machines with secret programs are now trading stocks in tiny fractions of a second, way too fast to be seen or recorded on a stock ticker or computer screen. Faster than the market itself. High-frequency traders, big Wall Street firms and stock exchanges have spent billions to gain an advantage of a millisecond for themselves and their customers, just to get a peek at stock market prices and orders a flash before everyone else, along with the opportunity to act on it.
Michael Lewis: The insiders are able to move faster than you. They’re able to see your order and play it against other orders in ways that you don’t understand. They’re able to front run your order.
Steve Kroft: What do you mean front run?
Michael Lewis: Means they’re able to identify your desire to, to buy shares in Microsoft and buy ‘em in front of you and sell ‘em back to you at a higher price. It all happens in infinitesimally small periods of time. There’s speed advantage that the faster traders have is milliseconds, some of it is fractions of milliseconds. But it”s enough for them to identify what you’re gonna do and do it before you do it at your expense.
Steve Kroft: So it drives the price up.
Michael Lewis: So it drives the price up, and in turn you pay a higher price.
You can watch the entire interview right here. Unlike most mainstream media news reports, this one is actually worth your time. I have watched the entire thing, and I highly recommend it.
Of course there have been many that have been screaming about high frequency trading for many years. Zero Hedge is just one example. This practice has gone on year after year and the federal government has looked the other way.
These high frequency trading firms do not add anything to society. As Barry Ritholtz noted recently, one of these firms has an average holding period for stocks of just 11 seconds, and at one point it stated that it had “not had a losing day of trading in four years“…
The only surprising thing about Lewis’s assertion was that anyone could be even remotely surprised by it.
The math on trading is simple: It is a zero-sum game. One trader’s gain is another trader’s loss. Only in the case of HFT, the losers are the investors — by way of their pension funds, retirement accounts and institutional funds. The HFT’s take — the “skim” — comes out of these large institution’s trade executions.
The technology behind HFT may be complex, but the math is that simple. Once the Securities and Exchange Commission allowed stock exchanges to share with traders all of the unexecuted incoming orders, it was hard not to make money by skimming a few cents or fractions of a cent from each trade. Several years ago, the founder of Tradebot, one of the biggest high-frequency firms, had said that the firm had “not had a losing day of trading in four years.” The firm’s average holding period for stocks is 11 seconds.
How in the world does that kind of behavior add any value to society?
They are just skimming money that should be going to others. Billions of dollars is essentially being stolen from pension funds and retirement accounts, and it is time that people started getting outraged about this.
Unfortunately, even if this practice is outlawed, the truth is that the odds will still never be in our favor.
There are millions of Americans that dream of getting ahead, but they never seem to be able to get there. They work incredibly hard, but the more they earn, the more the government taxes them. If somehow you do manage to scrape together a little bit of money to invest in the financial markets, any profits that you make will be endlessly eroded by fees, commissions and even more taxes.
And it is important to remember that in the financial world, the “little guy” is regarded as easy prey by the hungry wolves that are all too eager to find a way to transfer your money into their own pockets. If you don’t know what you are doing, it is all too easy to get absolutely slaughtered.
On Wall Street, there are winners and there are losers.
Most of the time, “the little guys” end up losing.
But at least they could try to have a system that at least has the appearance of fairness. As long as high frequency trading exists, that will never be the case.