Banksters

When The Derivatives Market Crashes (And It Will) U.S. Taxpayers Will Be On The Hook

Warren Buffett once said that derivatives are “financial weapons of mass destruction”, and that statement is more true today than it ever has been before.  Recently, JP Morgan made national headlines when it announced that it was going to take a 2 billion dollar loss from derivatives trades gone bad.  Well, it turns out that JP Morgan did not tell us the whole truth.  As you will see later in this article, most analysts are estimating that the losses will eventually be far larger than 2 billion dollars.  But no matter how bad things get for JP Morgan, it will not be allowed to fail.  JP Morgan is the largest bank in the United States, so it is essentially the “granddaddy” of the too big to fail banks.  If JP Morgan gets to the point where it is about to collapse, the U.S. government and the Federal Reserve will rush in to save it.  Because of this “security blanket”, banks such as JP Morgan feel free to take outrageous risks.  Today, JP Morgan has more exposure to derivatives than anyone else in the world.  If they win, they win big.  If they lose, U.S. taxpayers will be on the hook.  Not only that, but thanks to Dodd-Frank, U.S. taxpayers are on the hook for bailing out the major derivatives clearinghouses if there is ever a major derivatives crisis.  So when the derivatives market crashes (and it will) you and I will be left holding a gigantic bill.

Derivatives almost caused the complete collapse of insurance giant AIG back in 2008.  But instead of learning our lessons, the derivatives bubble has gotten even larger since that time.

A Bloomberg article that was published last year contained a great quote from Mark Mobius about derivatives….

Mark Mobius, executive chairman of Templeton Asset Management’s emerging markets group, said another financial crisis is inevitable because the causes of the previous one haven’t been resolved.

“There is definitely going to be another financial crisis around the corner because we haven’t solved any of the things that caused the previous crisis,” Mobius said at the Foreign Correspondents’ Club of Japan in Tokyo today in response to a question about price swings. “Are the derivatives regulated? No. Are you still getting growth in derivatives? Yes.”

Never in the history of the world have we ever seen anything like this derivatives bubble.

But instead of getting it under control, we just allowed it to get bigger and bigger and bigger.

Now JP Morgan is in quite a bit of trouble.  A recent Daily Finance article summarized how JP Morgan got into this mess….

Bruno Iksil, a trader working in the bank’s London office, placed a massive bet in the derivatives market. Derivatives “derive” their value from the value of an underlying asset, like stocks, bonds, currencies, or a market index. The specific type of derivative used in Iksil’s bet was a credit default swap index, known as “CDX.NA.IG.9.”

CDX.NA.IG.9 tracks a basket of corporate bonds. Iksil’s positions on the index were so big (one report put it at $100 billion) that they were moving the market and interfering with other traders’ positions. These annoyed traders — hedge-fund managers — dubbed Iksil “the London Whale” for his outsize bets.

So if the real number isn’t 2 billion dollars, how much will JP Morgan eventually lose?

Morgan Stanley says that the losses could eventually reach 5 billion dollars.

The Independent is reporting that the losses could eventually reach 7 billion dollars.

One author featured on Zero Hedge suggested that the losses could ultimately reach 20 billion dollars….

Simple: because it knew with 100% certainty that if things turn out very, very badly, that the taxpayer, via the Fed, would come to its rescue. Luckily, things turned out only 80% bad. Although it is not over yet: if credit spreads soar, assuming at $200 million DV01, and a 100 bps move, JPM could suffer a $20 billion loss when all is said and done. But hey: at least “net” is not “gross” and we know, just know, that the SEC will get involved and make sure something like this never happens again.

The truth is that nobody really knows.  Everybody agrees that the losses will likely far exceed 2 billion dollars, but the real extent of the crisis will not be known until the trades play out.

According to the Huffington Post, JP Morgan recently sold 25 billion dollars of profitable securities to raise some cash.  The profit on the sale of those securities will be somewhere in the neighborhood of a billion dollars.

A billion dollars will help, but it will not be nearly enough.

Many are interpreting this move as a sign of panic by JP Morgan.

Meanwhile, JP Morgan CEO Jamie Dimon continues to do quite well.  In fact, his 23 million dollar pay package was recently approved by shareholders at an annual meeting.

Wouldn’t you like to do your job badly and still make 23 million dollars?

Right now, JP Morgan is essentially in a “staring contest” with those on the other side of the derivatives trades that went bad.  This “staring contest” was described in a recent CNN article….

It’s clear from public data filed with The Depository Trust & Clearing Corporation that JPMorgan Chase hasn’t sold any of its positions yet. The DTCC tracks trading activity and sizes of positions on the IG9 and other indexes, and there haven’t been any big moves since last week.

“Whatever the size was, it’s clearly not something that you can call one or two dealers and sell,” said Garth Friesen, a co-chief investment officer at AVM, a derivatives hedge fund that’s not involved in these trades.

As soon as it becomes clear that JPMorgan Chase is unwinding its position, it will be obvious to players on every major trading desk. Hedge funds will immediately start piling into that index and buying protection, driving up the bank’s losses.

Until then, it won’t cost the hedge funds much to sit and wait.

JP Morgan is desperately hoping that the markets move in their favor.

If the markets move against JP Morgan in a big way it could potentially be absolutely catastrophic for the biggest bank in America.

An excerpt from an email that Steve Quayle recently received from an anonymous international banking source contained some chilling analysis of the situation….

The derivative market that JPM plays in is the CDX.NA.IG.9, when factions within their London office (London Whale) made overly leveraged swaps, hedge funds smelled blood and so did a few banks. You see any moves that JPM does here on out exposes their weakness further. Which they can not afford any more exposure thus they are not buying back any more shares which is the equivalent of cutting an artery in a pool full of sharks. The strategy they are taking right now is to sit through the storm and ride it out as they can do nothing else for any action will make them even more vulnerable. They can not absorb hits in both JPM SLV and CDX.NA.IG.9. Inactivity is not something they want to do it is something they have to do. There is no other choice for them.

So what will happen if JP Morgan loses too much money?

Well, it will beg the U.S. government and the Federal Reserve for money and the U.S. government and the Federal Reserve will comply.

There is no way that they are going to let the largest bank in America fail.

In addition, as I mentioned earlier, Dodd-Frank has put U.S. taxpayers on the hook for future bailouts of derivatives clearinghouses.  This was detailed in a recent Wall Street Journal article….

Little noticed is that on Tuesday Team Obama took its first formal steps toward putting taxpayers behind Wall Street derivatives trading — not behind banks that might make mistakes in derivatives markets, but behind the trading itself. Yes, the same crew that rails against the dangers of derivatives is quietly positioning these financial instruments directly above the taxpayer safety net.

One of the things that Dodd-Frank does is that it gives the Federal Reserve the power to provide “discount and borrowing privileges” to derivatives clearinghouses in the event of a major derivatives crisis.

This is what our politicians love to do.

They love to have the U.S. taxpayer guarantee everything.

Our politicians look at us as one giant insurance policy.

Apparently they believe that if anything in the financial world goes wrong that U.S. taxpayers should be the ones to clean up the mess.

But will we really have enough money to bail everyone out when the derivatives market crashes?

Today, the 9 largest banks in the United States have a total of more than 200 trillion dollars of exposure to derivatives.

That is approximately 3 times the size of the entire global economy.

The U.S. government is already nearly 16 trillion dollars in debt.

How in the world can we afford to keep bailing out the huge messes that Wall Street makes?

Sadly, most Americans have no idea how vulnerable our financial system really is.

It is a poorly constructed house of cards that could come crashing down at any time.

If you still have faith in our financial system you are being quite foolish and you will soon be bitterly, bitterly disappointed.

The 2 Billion Dollar Loss By JP Morgan Is Just A Preview Of The Coming Collapse Of The Derivatives Market

When news broke of a 2 billion dollar trading loss by JP Morgan, much of the financial world was absolutely stunned.  But the truth is that this is just the beginning.  This is just a very small preview of what is going to happen when we see the collapse of the worldwide derivatives market.  When most Americans think of Wall Street, they think of a bunch of stuffy bankers trading stocks and bonds.  But over the past couple of decades it has evolved into much more than that.  Today, Wall Street is the biggest casino in the entire world.  When the “too big to fail” banks make good bets, they can make a lot of money.  When they make bad bets, they can lose a lot of money, and that is exactly what just happened to JP Morgan.  Their Chief Investment Office made a series of trades which turned out horribly, and it resulted in a loss of over 2 billion dollars over the past 40 days.  But 2 billion dollars is small potatoes compared to the vast size of the global derivatives market.  It has been estimated that the the notional value of all the derivatives in the world is somewhere between 600 trillion dollars and 1.5 quadrillion dollars.  Nobody really knows the real amount, but when this derivatives bubble finally bursts there is not going to be nearly enough money on the entire planet to fix things.

Sadly, a lot of mainstream news reports are not even using the word “derivatives” when they discuss what just happened at JP Morgan.  This morning I listened carefully as one reporter described the 2 billion dollar loss as simply a “bad bet”.

And perhaps that is easier for the American people to understand.  JP Morgan made a series of really bad bets and during a conference call last night CEO Jamie Dimon admitted that the strategy was “flawed, complex, poorly reviewed, poorly executed and poorly monitored”.

The funny thing is that JP Morgan is considered to be much more “risk averse” than most other major Wall Street financial institutions are.

So if this kind of stuff is happening at JP Morgan, then what in the world is going on at some of these other places?

That is a really good question.

For those interested in the technical details of the 2 billion dollar loss, an article posted on CNBC described exactly how this loss happened….

The failed hedge likely involved a bet on the flattening of a credit derivative curve, part of the CDX family of investment grade credit indices, said two sources with knowledge of the industry, but not directly involved in the matter. JPMorgan was then caught by sharp moves at the long end of the bet, they said. The CDX index gives traders exposure to credit risk across a range of assets, and gets its value from a basket of individual credit derivatives.

In essence, JP Morgan made a series of bets which turned out very, very badly.  This loss was so huge that it even caused members of Congress to take note.  The following is from a statement that U.S. Senator Carl Levin issued a few hours after this news first broke….

“The enormous loss JPMorgan announced today is just the latest evidence that what banks call ‘hedges’ are often risky bets that so-called ‘too big to fail’ banks have no business making.”

Unfortunately, the losses from this trade may not be over yet.  In fact, if things go very, very badly the losses could end up being much larger as a recent Zero Hedge article detailed….

Simple: because it knew with 100% certainty that if things turn out very, very badly, that the taxpayer, via the Fed, would come to its rescue. Luckily, things turned out only 80% bad. Although it is not over yet: if credit spreads soar, assuming at $200 million DV01, and a 100 bps move, JPM could suffer a $20 billion loss when all is said and done. But hey: at least “net” is not “gross” and we know, just know, that the SEC will get involved and make sure something like this never happens again.

And yes, the SEC has announced an “investigation” into this 2 billion dollar loss.  But we all know that the SEC is basically useless.  In recent years SEC employees have become known more for watching pornography in their Washington D.C. offices than for regulating Wall Street.

But what has become abundantly clear is that Wall Street is completely incapable of policing itself.  This point was underscored in a recent commentary by Henry Blodget of Business Insider….

Wall Street can’t be trusted to manage—or even correctly assess—its own risks.

This is in part because, time and again, Wall Street has demonstrated that it doesn’t even KNOW what risks it is taking.

In short, Wall Street bankers are just a bunch of kids playing with dynamite.

There are two reasons for this, neither of which boil down to “stupidity.”

  • The first reason is that the gambling instruments the banks now use are mind-bogglingly complicated. Warren Buffett once described derivatives as “weapons of mass destruction.” And those weapons have gotten a lot more complex in the past few years.
  • The second reason is that Wall Street’s incentive structure is fundamentally flawed: Bankers get all of the upside for winning bets, and someone else—the government or shareholders—covers the downside.

The second reason is particularly insidious. The worst thing that can happen to a trader who blows a huge bet and demolishes his firm—literally the worst thing—is that he will get fired. Then he will immediately go get a job at a hedge fund and make more than he was making before he blew up the firm.

We never learned one of the basic lessons that we should have learned from the financial crisis of 2008.

Wall Street bankers take huge risks because the risk/reward ratio is all messed up.

If the bankers make huge bets and they win, then they win big.

If the bankers make huge bets and they lose, then the federal government uses taxpayer money to clean up the mess.

Under those kind of conditions, why not bet the farm?

Sadly, most Americans do not even know what derivatives are.

Most Americans have no idea that we are rapidly approaching a horrific derivatives crisis that is going to make 2008 look like a Sunday picnic.

According to the Comptroller of the Currency, the “too big to fail” banks have exposure to derivatives that is absolutely mind blowing.  Just check out the following numbers from an official U.S. government report….

JPMorgan Chase – $70.1 Trillion

Citibank – $52.1 Trillion

Bank of America – $50.1 Trillion

Goldman Sachs – $44.2 Trillion

So a 2 billion dollar loss for JP Morgan is nothing compared to their total exposure of over 70 trillion dollars.

Overall, the 9 largest U.S. banks have a total of more than 200 trillion dollars of exposure to derivatives.  That is approximately 3 times the size of the entire global economy.

It is hard for the average person on the street to begin to comprehend how immense this derivatives bubble is.

So let’s not make too much out of this 2 billion dollar loss by JP Morgan.

This is just chicken feed.

This is just a preview of coming attractions.

Soon enough the real problems with derivatives will begin, and when that happens it will shake the entire global financial system to the core.

The Too Big To Fail Banks Are Now Much Bigger And Much More Powerful Than Ever

The Democrats, the Republicans and especially Barack Obama promised that something would be done about the too big to fail banks so that they would never again be a threat to destroy our financial system.  Well, those promises have not been kept and the too big to fail banks are now much bigger and much more powerful than ever.  The assets of the five biggest U.S. banks were equivalent to about 43 percent of U.S. GDP before the financial crisis.  Today, the assets of the five biggest U.S. banks are equivalent to about 56 percent of U.S. GDP.  So if those banks were “too big to fail” before, then what are they now?  They continue to gobble up smaller banks at a brisk pace, and they continue to pile up debt and risky investments as if a day of reckoning will never come.  But of course a day of reckoning is coming, and when it arrives they will be expecting more bailouts just like they got the last time.

The size of these monolithic financial institutions is truly difficult to comprehend.  They completely dominate our financial system and everywhere you look they are constantly absorbing more wealth and more power.  The following comes from a recent Bloomberg article….

Five banks — JPMorgan Chase & Co. (JPM), Bank of America Corp. (BAC), Citigroup Inc., Wells Fargo & Co. (WFC), and Goldman Sachs Group Inc. — held $8.5 trillion in assets at the end of 2011, equal to 56 percent of the U.S. economy, according to central bankers at the Federal Reserve.

Five years earlier, before the financial crisis, the largest banks’ assets amounted to 43 percent of U.S. output. The Big Five today are about twice as large as they were a decade ago relative to the economy

Despite all of the talk from the politicians, they just keep getting bigger and bigger and bigger.

So why isn’t anything ever done?

Well, one reason is because these gigantic financial entities funnel huge quantities of cash into political campaigns.

For example, Barack Obama gives nice speeches about the dangers of the too big to fail banks, but he is also more than happy to take their campaign contributions.  Goldman Sachs, JPMorgan Chase and Citigroup were all ranked among his top 10 donors during the 2008 campaign.

So do you really expect that Barack Obama is going to bite the hands that feed him?

Of course he is not going to do that.

The truth is that the Obama administration and the Federal Reserve have done everything they can to make life very comfortable for the big Wall Street banks.

During the last financial crisis, the too big to fail banks were absolutely showered with bailouts.

Meanwhile, hundreds of small and mid-size banks were allowed to die.

When representatives from those small and mid-size banks contacted the federal government for help, often they were told to try to find a larger bank that would be willing to buy them.

Sadly, the last financial crisis simply accelerated the consolidation of the banking industry in the United States that has been going on for several decades.

Today, there are less than half as many banks in the United States as there were back in 1984.

So where did all of those banks go?

They were either purchased by bigger banks or they were allowed to go out of existence.

This banking consolidation trend has allowed the big Wall Street banks to absolutely explode in size.

Back in 1970, the 5 biggest U.S. banks held 17 percent of all U.S. banking industry assets.

Today, the 5 biggest U.S. banks hold 52 percent of all U.S. banking industry assets.

So where will this end?

That is a good question.

The funny thing is that Federal Reserve Chairman Ben Bernanke and other Fed officials keep giving speeches where they warn of the dangers of having banks that are “too big to fail”.  For example, during a recent presentation to students at George Washington University, Bernanke made the following statement about the U.S. banking system….

“But clearly, it is something fundamentally wrong with a system in which some companies are ‘too big to fail.'”

So does that mean that Bernanke is against the too big to fail banks?

Of course not.

The truth is that he showered those banks with trillions of dollars in bailout money during the last financial crisis.

The amount of money in secret loans that some of the big Wall Street banks received from the Federal Reserve was absolutely staggering.  The following figures come directly from a GAO report….

Citigroup – $2.513 trillion
Morgan Stanley – $2.041 trillion
Bank of America – $1.344 trillion
Goldman Sachs – $814 billion
JP Morgan Chase – $391 billion

Bernanke has shown that he is willing to move heaven and earth to protect those big banks.

So what did those banks do with all that money?

They certainly didn’t lend it to us.  Lending to individuals and small businesses by those big banks actually went down immediately after those bailouts.

Instead, one thing that those banks did was they started putting massive amounts of money into commodities.

One of those commodities was food.

Over the past few years, big Wall Street banks have made huge amounts of money speculating on the price of food.  This has caused food prices all over the globe to soar and it has caused tremendous hardship for hundreds of millions of families around the planet.  The following is from a recent article in The Independent….

Speculation by large investment banks is driving up food prices for the world’s poorest people, tipping millions into hunger and poverty. Investment in food commodities by banks and hedge funds has risen from $65bn to $126bn (£41bn to £79bn) in the past five years, helping to push prices to 30-year highs and causing sharp price fluctuations that have little to do with the actual supply of food, says the United Nations’ leading expert on food.

Hedge funds, pension funds and investment banks such as Goldman Sachs, Morgan Stanley and Barclays Capital now dominate the food commodities markets, dwarfing the amount traded by actual food producers and buyers.

Goldman Sachs alone has earned hundreds of millions of dollars in profits from food speculation.

Can you imagine what kind of mindset it takes to do this?

Can you imagine taking food out of the mouths of hungry families on the other side of the world so that you and your fellow employees can pad your bonus checks?

It really is disgusting.

But that is the way the game is played.

It is set up so that the big guy will win and the little guy will lose.

The other day I wrote about how this is particularly true when it comes to our system of taxation.

Well, since that article I have discovered some new numbers that were just released by Citizens for Tax Justice.  Some of the things that they have uncovered are absolutely amazing….

Between 2008 and 2011, Verizon made a total profit of $19.8 billion and yet paid an effective tax rate of -3.8%.

Between 2008 and 2011, General Electric made a total profit of $19.6 billion and yet paid an effective tax rate of -18.9%.

Between 2008 and 2011, Boeing made a total profit of $14.8 billion and yet paid an effective tax rate of -5.5%.

Between 2008 and 2011, Pacific Gas & Electric made a total profit of $6 billion and yet paid an effective tax rate of -8.4%.

So why should middle class families continue to be suffocated by outrageous tax rates when hugely profitable corporations such as General Electric are able to get away with paying nothing?

Our current tax system is an utter abomination and should be completely thrown out.

But as is the case with so many other things, our current system is going to persist because the “big guys” really enjoy the status quo and they are the ones that fund political campaigns.

It would be bad enough if the “big guys” were beating us on a level playing field.

But the truth is that the game has been dramatically tilted in their favor and they know that the politicians are going to take care of them whenever they need it.

So what is going to happen the next time the too big to fail banks get into trouble?

They will almost certainly get bailed out again.

Unfortunately, the big Wall Street banks continue to treat the financial system as if it was a gigantic casino.  The derivatives bubble just continues to grow larger and larger, and it could burst and absolutely devastate the entire global financial system at any time.

According to the New York Times, the too big to fail banks have complete domination over derivatives trading.  Every month a secret meeting that includes representatives from JPMorgan Chase, Goldman Sachs, Morgan Stanley, Bank of America and Citigroup is held in New York to coordinate their control over the derivatives marketplace.  The following is how the New York Times describes those meetings….

On the third Wednesday of every month, the nine members of an elite Wall Street society gather in Midtown Manhattan.

The men share a common goal: to protect the interests of big banks in the vast market for derivatives, one of the most profitable — and controversial — fields in finance. They also share a common secret: The details of their meetings, even their identities, have been strictly confidential.

When the derivatives market fully implodes, there will not be enough money in the world to bail everyone out.  According to the Comptroller of the Currency, the too big to fail banks have exposure to derivatives that is absolutely outrageous.  Just check out the following numbers….

JPMorgan Chase – $70.1 Trillion

Citibank – $52.1 Trillion

Bank of America – $50.1 Trillion

Goldman Sachs – $44.2 Trillion

So what happens when that house of cards comes crashing down?

Well, those big banks will come crying to the federal government again.

They will want more bailouts.

They will claim that if we don’t give them the money that they need that the entire financial system will collapse.

And yes, if several of the too big to fail banks were to collapse all at once the consequences would be almost unimaginable.

But of course all of this could have been avoided if we would have made much wiser decisions upstream.

Our financial system is more vulnerable than it ever has been before, and the too big to fail banks just continue to grow.

The lessons from the financial crisis of 2008 have gone unheeded, and we are steamrolling toward an even greater crash.

What a mess.

A Cashless Society May Be Closer Than Most People Would Ever Dare To Imagine

Most people think of a cashless society as something that is way off in the distant future.  Unfortunately, that is simply not the case.  The truth is that a cashless society is much closer than most people would ever dare to imagine.  To a large degree, the transition to a cashless society is being done voluntarily.  Today, only 7 percent of all transactions in the United States are done with cash, and most of those transactions involve very small amounts of money.  Just think about it for a moment.  Where do you still use cash these days?  If you buy a burger or if you purchase something at a flea market you will still use cash, but for any mid-size or large transaction the vast majority of people out there will use another form of payment.  Our financial system is dramatically changing, and cash is rapidly becoming a thing of the past.  We live in a digital world, and national governments and big banks are both encouraging the move away from paper currency and coins.  But what would a cashless society mean for our future?  Are there any dangers to such a system?

Those are very important questions, but most of the time both sides of the issue are not presented in a balanced way in the mainstream media.  Instead, most mainstream news articles tend to trash cash and talk about how wonderful digital currency is.

For example, a recent CBS News article declared that soon we may not need “that raggedy dollar bill” any longer and that the “greenback may soon be a goner”….

It’s what the wallet was invented for, to carry cash. After all, there was a time when we needed cash everywhere we went, from filling stations to pay phones. Even the tooth fairy dealt only in cash.

But money isn’t just physical anymore. It’s not only the pennies in your piggy bank, or that raggedy dollar bill.

Money is also digital – it’s zeros and ones stored in a computer, prompting some economists to predict the old-fashioned greenback may soon be a goner.

“There will be a time – I don’t know when, I can’t give you a date – when physical money is just going to cease to exist,” said economist Robert Reich.

So will we see a completely cashless society in the near future?

Of course not.  It would be wildly unpopular for the governments of the world to force such a system upon us all at once.

Instead, the big banks and the governments of the industrialized world are doing all they can to get us to voluntarily transition to such a system.  Once 98 or 99 percent of all transactions do not involve cash, eliminating the remaining 1 or 2 percent will only seem natural.

The big banks want a cashless society because it is much more profitable for them.

The big banks earn billions of dollars in fees from debit cards and they make absolutely enormous profits from credit cards.

But when people use cash the big banks do not earn anything.

So obviously the big banks and the big credit card companies are big cheerleaders for a cashless society.

Most governments around the world are eager to transition to a cashless society as well for the following reasons….

-Cash is expensive to print, inspect, move, store and guard.

-Counterfeiting is always going to be a problem as long as paper currency exists.

-Cash if favored by criminals because it does not leave a paper trail.  Eliminating cash would make it much more difficult for drug dealers, prostitutes and other criminals to do business.

-Most of all, a cashless society would give governments more control.  Governments would be able to track virtually all transactions and would also be able to monitor tax compliance much more closely.

When you understand the factors listed above, it becomes easier to understand why the use of cash is increasingly becoming demonized.  Governments around the world are increasingly viewing the use of cash in a negative light.  In fact, according to the U.S. government paying with cash in some circumstances is now considered to be “suspicious activity” that needs to be reported to the authorities.

This disdain of cash has also grown very strong in the financial community.  The following is from a recent Slate article….

David Birch, a director at Consult Hyperion, a firm specializing in electronic payments, says a shift to digital currency would cut out these hidden costs. In Birch’s ideal world, paying with cash would be viewed like drunk driving—something we do with decreasing frequency as more and more people understand the negative social consequences. “We’re trying to use industrial age money to support commerce in a post-industrial age. It just doesn’t work,” he says. “Sooner or later, the tectonic plates shift and then, very quickly, you’ll find yourself in this new environment where if you ask somebody to pay you in cash, you’ll just assume that they’re a prostitute or a Somali pirate.”

Do you see what is happening?

Simply using cash is enough to get you branded as a potential criminal these days.

Many people are going to be scared away from using cash simply because of the stigma that is becoming attached to it.

This is a trend that is not just happening in the United States.  In fact, many other countries are further down the road toward a cashless society than we are.

Up in Canada, they are looking for ways to even eliminate coins so that people can use alternate forms of payment for all of their transactions….

The Royal Canadian Mint is also looking to the future with the MintChip, a new product that could become a digital replacement for coins.

In Sweden, only about 3 percent of all transactions still involve cash.  The following comes from a recent Washington Post article….

In most Swedish cities, public buses don’t accept cash; tickets are prepaid or purchased with a cell phone text message. A small but growing number of businesses only take cards, and some bank offices — which make money on electronic transactions — have stopped handling cash altogether.

“There are towns where it isn’t at all possible anymore to enter a bank and use cash,” complains Curt Persson, chairman of Sweden’s National Pensioners’ Organization.

In Italy, all very large cash transactions have been banned.  Previously, the limit for using cash in a transaction had been reduced to the equivalent of just a few thousand dollars.  But back in December, Prime Minister Mario Monti proposed a new limit of approximately $1,300 for cash transactions.

And that is how many governments will transition to a cashless society.  They will set a ceiling and then they will keep lowering it and lowering it.

But is a cashless society really secure?

Of course not.

Bank accounts can be hacked into.  Credit cards and debit cards can be stolen.  Identity theft all over the world is absolutely soaring.

So companies all over the planet are working feverishly to make all of these cashless systems much more secure.

In the future, it is inevitable that national governments and big financial institutions will want to have all of us transition over to using biometric identity systems in order to combat crime in the financial system.

Many of these biometric identity systems are becoming quite advanced.

For example, just check out what IBM has been developing.  The following is from a recent IBM press release….

You will no longer need to create, track or remember multiple passwords for various log-ins. Imagine you will be able to walk up to an ATM machine to securely withdraw money by simply speaking your name or looking into a tiny sensor that can recognize the unique patterns in the retina of your eye. Or by doing the same, you can check your account balance on your mobile phone or tablet.

Each person has a unique biological identity and behind all that is data. Biometric data – facial definitions, retinal scans and voice files – will be composited through software to build your DNA unique online password.

Referred to as multi-factor biometrics, smarter systems will be able to use this information in real-time to make sure whenever someone is attempting to access your information, it matches your unique biometric profile and the attempt is authorized.

Are you ready for that?

It is coming.

In the future, if you do not surrender your biometric identity information, you may be locked out of the entire financial system.

Another method that can be used to make financial identification more secure is to use implantable RFID microchips.

Yes, there is a lot of resistance to this idea, but the fact is that the use of RFID chips in animals and in humans is rapidly spreading.

Some U.S. cities have already made it mandatory to implant microchips into all cats and all dogs so that they can be tracked.

All over the United States, employees are being required to carry badges that contain RFID chips, and in some instances employers are actually requiring employees to have RFID chips injected into their bodies.

Increasingly, RFID chips are being implanted in the upper arm of patients that have Alzheimer’s disease.  The idea is that this helps health care providers track Alzheimer’s patients that get lost.

In some countries, microchips are now actually being embedded into school uniforms to make sure that students don’t skip school.

Can you see where all of this is headed?

Some companies are even developing RFID technologies that do not require an injection.

One company called Somark has developed chipless RFID ink that is applied directly to the skin of an animal or a human.  These “RFID tattoos” are applied in about 10 seconds using micro-needles and a reusable applicator, and they can be read by an RFID reader from up to four feet away.

Would you get an “RFID tattoo” if the government or your bank asked you to?

Some people out there are actually quite excited about these new technologies.

For example, a columnist named Don Tennant wrote an article entitled “Chip Me – Please!” in which he expressed his unbridled enthusiasm for an implantable microchip which would contain all of his medical information….

“All I can say is I’d be the first person in line for an implant.”

But are there real dangers to going to a system that is entirely digital?

For example, what if a devastating EMP attack wiped out our electrical grid and most of our computers from coast to coast?

How would we continue to function?

Sadly, most people don’t think about things like that.

Our world is changing more rapidly than ever before, and we should be mindful of where these changes are taking us.

Just because our technology is advancing does not mean that our world is becoming a better place.

There are millions of Americans that want absolutely nothing to do with biometric identity systems or RFID implants.

But the mainstream media continues to declare that nothing can stop the changes that are coming.  A recent CBS News article made the following statement….

“Most agree a cashless society is not only inevitable, for most of us, it’s already here.”

Yes, a cashless society is coming.

Are you ready for it?

The Crazy Things That One Whistleblower Says Are Happening At JP Morgan Will Blow Your Mind

Rampant silver manipulation?  Rampant gold manipulation?  Rampant LIBOR manipulation?  Hiding MF Global client assets?  These are all happening at JP Morgan according to an open letter reportedly written by an anonymous employee of the firm.  The whistleblower also warns of a “cascading credit event being triggered” by derivatives related to Greek government debt.  Unlike Greg Smith at Goldman Sachs, this whistleblower has chosen to remain anonymous for now.  According to the letter, the whistleblower is still an employee of JP Morgan and has not resigned.  But that does make it much more difficult to confirm what he is saying.  With Greg Smith, we know exactly who he is and what he was doing at Goldman.  As far as this anonymous whistleblower is concerned, all we have is this letter.  So we must take it with a grain of salt.  However, the information in this letter does agree with what whistleblowers such as Andrew Maguire have said in the past about silver manipulation by JP Morgan.  And this letter does mention Greg Smith’s resignation from Goldman, so we know that it must have been written in the past few days.  Hopefully this letter will cause authorities to take a much closer look at the crazy things that are going on over at JP Morgan and the other big Wall Street banks.

This anonymous letter was addressed to the CFTC, but unfortunately it looks like the CFTC has already chosen to ignore it.

The original letter from this anonymous whistleblower has already been taken down from the CFTC website. When you go there now, all you get is this message….

“The Comment Cannot Be Found. Please Return to the Previous Page and Try Again.”

Fortunately, there are many in the alternative media that copied this entire letter from the CFTC website.

The following is a copy of the original letter that the anonymous whistleblower from JP Morgan submitted to the CFTC….

———-

Dear CFTC Staff,

Hello, I am a current JPMorgan Chase employee. This is an open letter to all commissioners and regulators. I am emailing you today b/c I know of insider information that will be damning at best for JPMorgan Chase. I have decided to play the role of whistleblower b/c I no longer have faith and belief that what we are doing for society is bringing value to people. I am now under the opinion that we are actually putting hard working Americans unaware of what lays ahead at extreme market risk. This risk is unnecessary and will lead to wide-scale market collapse if not handled properly. With the release of Mr. Smith’s open letter to Goldman, I too would like to set the record straight for JPM as well. I have seen the disruptive behavior of superiors and no longer can say that I look up to employees at the ED/MD level here at JPM. Their smug exuberance and arrogance permeates the air just as pungently as rotting vegetables. They all know too well of the backdoor crony connections they share intimately with elected officials and with other institutions. It is apparent in everything they do, from the meager attempts to manipulate LIBOR, therefore controlling how almost all derivatives are priced to the inherit and fraudulent commodities manipulation. They too may have one day stood for something in the past in the client-employee relationship. Does anyone in today’s market really care about the protection of their client? From the ruthless and scandalous treatment of MF Global client asset funds to the excessive bonuses paid by companies with burgeoning liabilities. Yes, we at JPMorgan that are in the know are fearful of a cascading credit event being triggered in Greece as they have hidden derivatives in excess of $1 Trillion USD. We at JPMorgan own enough of these through counterparty risk and outright prop trading that our entire IB EDG space could be annihilated within a few short days. The last ten years has been market by inflexion point after inflexion point with the most notable coming in 2008 after the acquisition of Bear.

I wish to remain anonymous as of now as fear of termination mounts from what I am about to reveal. Robert Gottlieb is not my real name; however he is a trader that is involved in a lawsuit for manipulative trading while working with JPMorgan Chase. He was acquired during our Bear Stearns acquisition and is known to be the notorious person shorting in the silver future market from his trading space, along with Blythe Masters, his IB Global boss. However, with that said, we are manipulating the silver futures market and playing a smaller (but still massively manipulative) role in manipulating the gold futures market. We have a little over a 25% (give or take a percentage) position in the short market for silver futures and by your definition this denotes a larger position than for speculative purposes or for hedging and is beyond the line of manipulation.

On a side note, I do not work directly with accounts that would have been directly impacted by the MF Global fiasco but I have heard through other colleagues that we have involvement in the hiding of client assets from MF Global. This is another fraudulent effort on our part and constitutes theft. I urge you to forward that part of the investigation on to the respective authorities.

There is something else that you may find strange. During month-end December, we were all told by our managers that this was going to be a dismal year in terms of earnings and that we should not expect any bonuses or pay raises. Then come mid-late January it is made known that everyone received a pay raise and/or bonus, which is interesting b/c just a few weeks ago we were told that this was not likely and expected to be paid nothing in addition to base salary. January is right around the time we started increasing our short positions quite significantly again and this most recent crash in gold and silver during Bernanke’s speech on February 29th is of notable importance, as we along with 4 other major institutions, orchestrated the violent $100 drop in Gold and subsequent drops in silver.

As regulators of the free people of this country, I ask you to uphold the most important job in the world right now. That job is judge and overseer of all that is justice in the most sensitive of commodity markets. There are many middle-income people that invest in the physical assets of silver, gold, as well as mining stocks that are being financially impacted in a negative way b/c of our unscrupulous shorts in the precious metals commodity sector. If you read the COT with intent you will find that commercials (even though we have no business being in the commercial sector, which should be reserved for companies that truly produce the metal) are net short by a long shot in not only silver, but gold.

It is rather surprising that what should be well known liabilities on our balance sheet have not erupted into wider scale scrutinization. I call all honest and courageous JPMorgan employees to step up and fight the cronyism and wide-scale manipulation by reporting the truth. We are only helping reality come to light therefore allowing a real valuation of our banking industry which will give investors a chance to properly adjust without being totally wiped out. I will be contacting a lawyer shortly about this matter, as I believe no other whistleblower at JPMorgan has come forward yet. Our deepest secrets lie within the hands of honest employees and can be revealed through honest regulators that are willing to take a look inside one of America’s best kept secrets. Please do not allow this to turn into another Enron.

Kind Regards,
-The 1st Whistleblower of Many

———-

Another Enron?

If what this letter says is true, then the problems facing our financial system are more serious than most of us thought.

And the allegations of corruption at JP Morgan are absolutely shocking.

But this is not the first whistleblower to come forward to the CFTC with charges of rampant market manipulation by JP Morgan.

Back in 2010 I wrote about the stunning allegations that a former silver trader named Andrew Maguire presented to the CFTC.  The following is an extended excerpt from that article….

———-

Back in November 2009, Andrew Maguire, a former Goldman Sachs silver trader in Goldman’s London office, contacted the CFTC’s Enforcement Division and reported the illegal manipulation of the silver market by traders at JPMorgan Chase.

Maguire told the CFTC how silver traders at JPMorgan Chase openly bragged about their exploits – including how they sent a signal to the market in advance so that other traders could make a profit during price suppression episodes.

Traders would recognize these signals and would make money shorting precious metals alongside JPMorgan Chase.  Maguire explained to the CFTC how there would routinely be market manipulations at the time of option expiries, during non-farm payroll data releases, during commodities exchange contract rollovers, as well as at other times if it was deemed necessary.

On February 3rd, Maguire gave the CFTC a two day warning of a market manipulation event by email to Eliud Ramirez, who is a senior investigator for the CFTC’s Enforcement Division.

Maguire warned Ramirez that the price of precious metals would be suppressed upon the release of non-farm payroll data on February 5th.  As the manipulation of the precious metals markets was unfolding on February 5th, Maguire sent additional emails to Ramirez explaining exactly what was going on.

And it wasn’t just that Maguire predicted that the price would be forced down.  It was the level of precision that he was able to communicate to the CFTC that was the most stunning.  He warned the CFTC that the price of silver was to be taken down regardless of what happened to the employment numbers and that the price of silver would end up below $15 per ounce. Over the next couple of days, the price of silver was indeed taken down from $16.17 per ounce down to a low of $14.62 per ounce.

Because of Maguire’s warning, the CFTC was able to watch a crime unfold, right in front of their eyes, in real time.

So what did the CFTC do about it?

Nothing.

Absolutely nothing.

———-

You can read the rest of that article right here.

So will the CFTC do anything about all of this?

Based on past history, probably not.

Basically, the CFTC is a government agency that appears to do next to nothing.

Another scandal involving JP Morgan has come out in recent days as well.

This one involves their credit card division.  If you have a moments, you should really read the recent American Banker expose of credit card debt collection practices at JPMorgan Chase.  It exposes some things that will absolutely blow your mind.

Linda Almonte, a former executive at JPMorgan Chase’s Credit Card Litigation Support Group, has revealed some incredible stuff regarding the debt collection practices at the company.  Almonte says that she was shocked at what she saw when she began examining the details of a $200 million package of debt collection judgments to an outside debt collection agency….

Nearly half of the files her team sampled were missing proofs of judgment or other essential information, she wrote to colleagues. Even more worrisome, she alleged in her wrongful-termination suit, nearly a quarter of the files misstated how much the borrower owed.

In the “vast majority” of those instances, the actual debt was “lower that what Chase was representing,” her suit stated.

Almonte says that she warned that this sale of debt collection judgments must be stopped, but that a company executive told her that “she had better go along with the plan to sell the misrepresented asset“.

Almonte refused to go along, and she was fired on November 30th, 2009.

You are probably thinking that this sounds very much like the “robo-signing” foreclosure scandal and you would be right.

The more we dig into these giant financial companies the more corruption we find.

It really is shocking.

And remember, JPMorgan Chase is also the company that makes more money whenever the number of Americans on food stamps goes up.

JPMorgan Chase issues food stamp debit cards in 26 U.S. states and the District of Columbia, and they actually want more Americans to go on food stamps so that they can make bigger profits from the division that issues them.

So now are you starting to understand why so many Americans are upset about the corruption on Wall Street?

This isn’t a “conservative issue” or a “liberal issue” – it is an American issue and the outrageous behavior of these firms has brought our financial system once again to the edge of disaster.

Over the past six months, more than 350 prominent executives have resigned from major banks and financial institutions all over the globe.

Is this a sign that the rats are fleeing a sinking ship?

Do they know something that we don’t?

What we do know is that the financial crisis in Greece is far from over and the European financial system is getting closer to a complete meltdown with each passing day.

Very few of the things that caused the financial crisis of 2008 were ever corrected and our financial system is even more vulnerable today than it was back then.

In the end, this entire pyramid of debt, leverage and corruption is going to come crashing down really hard, and the consequences are going to be absolutely catastrophic.

11 Reasons Why America Would Be A Better Place Without Goldman Sachs

Would America be a better place without Goldman Sachs?  Of course it would.  The “vampire squid” of Wall Street does not care about the future of America.  Sadly, Goldman Sachs apparently does not even care much about their own clients.  What Goldman Sachs is all about is making as much money as humanly possible.  In the end, there is nothing wrong with making money, but there are constructive ways to make money and there are destructive ways to make money.  Unfortunately, Goldman Sachs seems to find the destructive path almost irresistible.  Greg Smith, the head of the U.S. equity derivatives business for Goldman Sachs in Europe, the Middle East and Africa made headlines all over the world on Wednesday when he resigned publicly from Goldman Sachs in a scorching editorial in the New York Times.  Smith said that he could “honestly say that the environment now is as toxic and destructive as I have ever seen it”.  Considering what we know has gone on at Goldman over the past decade, that is very frightening to hear.  So could this be the beginning of the end for Goldman Sachs?  And if it is, will America be a better place when Goldman is gone?

You would think that at some point clients of Goldman would become so sick and tired of the stories of corruption coming out of the firm that they would simply walk away.

Unfortunately, corruption is so endemic on Wall Street that Goldman Sachs really does not seem out of place.  The truth is that a lot of the things that are said about Goldman could also be said about JPMorgan Chase, Bank of America, Citigroup and Morgan Stanley.

But in recent years Goldman Sachs has truly become a national symbol of what is wrong with our financial system.  As the American people become fed up with institutions such as Goldman, hopefully we will start to see some of them disappear.

The following are 11 reasons why America would be a better place without Goldman Sachs….

#1 Even after all of the negative publicity we have seen in recent years, Goldman Sachs appears to not have learned any lessons.  The following is how Greg Smith described the three ways to get ahead at Goldman Sachs….

“What are three quick ways to become a leader? a) Execute on the firm’s “axes,” which is Goldman-speak for persuading your clients to invest in the stocks or other products that we are trying to get rid of because they are not seen as having a lot of potential profit. b) “Hunt Elephants.” In English: get your clients — some of whom are sophisticated, and some of whom aren’t — to trade whatever will bring the biggest profit to Goldman. Call me old-fashioned, but I don’t like selling my clients a product that is wrong for them. c) Find yourself sitting in a seat where your job is to trade any illiquid, opaque product with a three-letter acronym.”

#2 Goldman Sachs is one of the too big to fail banks and those banks just keeping getting bigger than ever.  Back in 2002, the top 10 U.S. banks controlled 55 percent of all U.S. banking assets.  Today, the top 10 U.S. banks control 77 percent of all U.S. banking assets.  So if we couldn’t afford to let them fail back in 2008 because they were so big, why did we allow them to become even larger?

#3 The Federal Reserve shows great favoritism to big Wall Street banks such as Goldman Sachs.  For example, between December 1, 2007 and July 21, 2010 the Federal Reserve made 814 billion dollars in secret loans to Goldman Sachs.

#4 Goldman Sachs is at the heart of the derivatives bubble that threatens to throw the entire global financial system into chaos.  At this point, Goldman Sachs has over 53 trillion dollars of exposure to derivatives.

According to the New York Times, the big Wall Street banks completely control derivatives trading.  In fact, the New York Times says that representatives from JPMorgan Chase, Goldman Sachs, Morgan Stanley, Bank of America and Citigroup hold a secretive meeting each month to coordinate their domination over the derivatives market….

On the third Wednesday of every month, the nine members of an elite Wall Street society gather in Midtown Manhattan.

The men share a common goal: to protect the interests of big banks in the vast market for derivatives, one of the most profitable — and controversial — fields in finance. They also share a common secret: The details of their meetings, even their identities, have been strictly confidential.

#5 Goldman Sachs was at the very heart of the financial crisis of 2008 which plunged the entire global economy into a very deep recession.  In the years leading up to the financial crisis of 2008, Goldman Sachs was putting together mortgage-backed securities that they knew were garbage and they marketed them to investors as AAA-rated investments.  On top of that, Goldman then often made huge bets against those exact same securities which turned out to be extremely profitable when those securities crashed and burned.

The following is how the New York Times described what was going on at the time….

“Goldman was not the only firm that peddled these complex securities — known as synthetic collateralized debt obligations, or C.D.O.’s — and then made financial bets against them, called selling short in Wall Street parlance. Others that created similar securities and then bet they would fail, according to Wall Street traders, include Deutsche Bank and Morgan Stanley, as well as smaller firms like Tricadia Inc.”

Sylvain Raynes, an expert in structured finance at R & R Consulting in New York, said at the time that he was absolutely shocked by what Goldman was doing….

“The simultaneous selling of securities to customers and shorting them because they believed they were going to default is the most cynical use of credit information that I have ever seen”

#6 Goldman Sachs played a huge role in getting Greece, Italy and several other European nations into so much debt.  The following is an excerpt from an article by Andrew Gavin Marshall….

In the same way that homeowners take out a second mortgage to pay off their credit card debt, Goldman Sachs and JP Morgan Chase and other U.S. banks helped push government debt far into the future through the derivatives market. This was done in Greece, Italy, and likely several other euro-zone countries as well. In several dozen deals in Europe, “banks provided cash upfront in return for government payments in the future, with those liabilities then left off the books.” Because the deals are not listed as loans, they are not listed as debt (liabilities), and so the true debt of Greece and other euro-zone countries was and likely to a large degree remains hidden. Greece effectively mortgaged its airports and highways to the major banks in order to get cash up-front and keep the loans off the books, classifying them as transactions.

#7 Goldman Sachs is working very hard to help state and local governments sell off our highways, water treatment plants, libraries, parking meters, airports and power plants to the highest bidder.  Much of the time foreigners are the highest bidders for these precious infrastructure assets.

The following is how Dylan Ratigan described what is going on….

On Wall Street, setting up and running “Infrastructure Funds” is big business, with over $140 billion run by such banks as Goldman Sachs, Morgan Stanley, and Australian infrastructure specialist Macquarie. Goldman’s 2010 SEC filing should give you some sense of the scope of the campaign. Goldman says it will be involved with “ownership and operation of public services, such as airports, toll roads and shipping ports, as well as power generation facilities, physical commodities and other commodities infrastructure components, both within and outside the United States.” While the bank sees increased opportunity in “distressed assets” (ie. Cities and states gone broke because of the financial crisis), the bank also recognizes “reputational concerns with the manner in which these assets are being operated or held.”

#8 At the same time that Goldman Sachs is causing all sorts of trouble for everyone else, their employees are making crazy amounts of money.  During 2010, employees of Goldman Sachs brought in more than 15 billion dollars in total compensation.

#9 Goldman Sachs has way too much influence over the federal government.  There is a reason why it is commonly referred to as “Government Sachs”.  No matter who is the White House, people that used to work for Goldman and other big Wall Street banks always seem to be crawling around.

Last year, Michael Brenner wrote the following about the composition of the Obama administration….

Wall Street’s takeover of the Obama administration is now complete. The mega-banks and their corporate allies control every economic policy position of consequence. Mr. Obama has moved rapidly since the November debacle to install business people where it counts most. Mr.William Daley from JP Morgan Chase as White House Chief of Staff. Mr. Gene Sperling from the Goldman Sachs payroll to be director of the National Economic Council. Eileen Rominger from Goldman Sachs named director of the SEC’s Investment Management division. Even the National Security Advisor, Thomas Donilon, was executive vice president for law and policy at the disgraced Fannie Mae after serving as a corporate lobbyist with O’Melveny & Roberts. The keystone of the business friendly team was put in place on Friday. General Electric Chairman and CEO Jeffrey Immelt will serve as chair of the president’s Council on Jobs and Competitiveness.

#10 Employees from Goldman Sachs pour way too much money into our national elections.  In 2008, donations from individuals and organizations affiliated with Goldman Sachs donated more than a million dollars to Barack Obama.  This time around they are pouring huge amounts of cash into Mitt Romney’s campaign.

#11 Goldman Sachs is still a “vampire squid” as Matt Taibbi once so famously proclaimed in Rolling Stone….

“The first thing you need to know about Goldman Sachs is that it’s everywhere. The world’s most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money. In fact, the history of the recent financial crisis, which doubles as a history of the rapid decline and fall of the suddenly swindled dry American empire, reads like a Who’s Who of Goldman Sachs graduates.”

Once again, there is nothing wrong with making money.

And there is certainly nothing wrong with working in the financial system.

But there is a right way to do things and there is a wrong way to do things.

Goldman Sachs is doing things very much the wrong way, and America would be a better place without them.

The Global Elite Are Hiding 18 Trillion Dollars In Offshore Banks

In recent days, the fact that Mitt Romney has millions of dollars parked down in the Cayman Islands has made headlines all over the world.  But when it comes to offshore banking, what Mitt Romney is doing is small potatoes.  The truth is that the global elite are hiding an almost unbelievable amount of money in offshore banks.  According to shocking research done by the IMF, the global elite are holding a total of 18 trillion dollars in offshore banks.  And that figure does not even count any money being held in Switzerland.  That is a staggering amount of money.  Keep in mind that U.S. GDP in 2010 was only 14.58 trillion dollars.  So why do the global elite go to such trouble to hide their money in offshore banks?  Well, there are two main reasons.  One is privacy and the other is low taxation.  Privacy is a big issue for those that are involved in illegal enterprises such as drug running, but the biggest reason why people move money into offshore banks is in order to avoid taxes.  Some set up bank accounts in foreign nations because they want to legally minimize their taxes and others set up bank accounts in foreign nations because they want to illegally avoid taxes.  You would be absolutely amazed at what some large corporations and wealthy individuals do to get out of paying taxes.  Unfortunately, the vast majority of the rest of us don’t have the resources or the knowledge to play these games, so we get taxed into oblivion.

So why do they call it “offshore banking”?

Well, the term originally developed because the banks on the Channel Islands were “offshore” from the United Kingdom.  Most “offshore banks” are still located on islands today.  The Cayman Islands, Bermuda, the Bahamas, and the Isle of Man are examples of this.  Other “offshore banking centers” such as Monaco are actually not “offshore” at all, but the term applies to them anyway.

Traditionally, these offshore banking centers have been very attractive to both criminals and to the global elite because they would not tell anyone (including governments) about the money that anyone had parked there.

These days some governments (particularly the U.S. government) are trying to change this, but we certainly will not see the end of offshore banking any time soon.

The amount of money that goes through these offshore banks is absolutely astounding.

It has been estimated that 80 percent of all international banking transactions take place through these offshore banks.  $1.4 trillion is being held in offshore banks in the Cayman Islands alone.

One article in the Guardian estimated that a third of all the wealth on the entire globe is being held in offshore banks, and others believe that as much as half of all the capital in the world flows through offshore banks at some point.

Obviously, all of this tax avoidance means that governments around the world are missing out on a whole lot of money.

It has been estimated that the U.S. government is missing out on $100 billion a year because of these offshore banks.  Others would put that figure significantly higher.

Avoiding taxes is a game that the global elite have mastered.  They are playing a whole different ballgame than you and I are.  They don’t just sit there like idiots and get blasted with taxes.  Instead, they hire the best experts and they employ every trick in the book to hold on to as much money as they possibly can.

These days, taking advantage of offshore tax havens is not that complicated to do.  The following is from a recent Politico article….

A plausible scenario plays out like this: I hire an accountant. Doing her job, my accountant tells me that if I sign a few legal documents and route my money through a small Caribbean island, I could keep more of my paycheck and pay a lower tax rate. I may have earned my money in the United States, but legally I can claim that it was, in fact, earned in a tax haven.

If it is legal, perhaps more of us should look into this.

After all, if playing these kinds of games is good enough for Mitt Romney, then why isn’t it good enough for all the rest of us?

During a campaign stop recently, Romney said the following….

“I can tell you we follow the tax laws”

I certainly believe him when he says that.  But it is what he said next that is troubling….

“And if there’s an opportunity to save taxes, we like anybody else in this country will follow that opportunity.”

I certainly believe him when he says that too.

ABC News recently revealed that Bain Capital has established an astounding 138 different offshore funds in the Cayman Islands.

Something has got to work pretty well to want to do it 138 times.

But Bain Capital was also very busy over in other offshore banking centers as well.

One of the largest shell companies that Bain set up down in the Caribbean was called Sankaty High Yield Asset Investors Ltd.  It did not have an office in Bermuda and it had no staff in Bermuda.  But it helped clients of Bain Capital avoid a whole lot of taxes.

The following comes from a 2007 Los Angeles Times article….

In Bermuda, Romney served as president and sole shareholder for four years of Sankaty High Yield Asset Investors Ltd. It funneled money into Bain Capital’s Sankaty family of hedge funds, which invest in bonds and other debt issued by corporations, as well as bank loans.

Like thousands of similar financial entities, Sankaty maintains no office or staff in Bermuda. Its only presence consists of a nameplate at a lawyer’s office in downtown Hamilton, capital of the British island territory.

“It’s just a mail drop, essentially,” said Marc B. Wolpow, who worked with Romney for nine years at Bain Capital and who set up Sankaty Ltd. in October 1997 without ever visiting Bermuda. “There’s no one doing any work down there other than lawyers.”

The amount of money being funneled through Sankaty today is absolutely stunning….

Today, Bain Capital manages $60 billion in assets, according to a spokesman. The total includes $23 billion in Sankaty debt and credit funds. Half a dozen Sankaty affiliates now are active in Bermuda, corporate registry records show.

The Sankaty debt hedge funds are organized as partnerships in Delaware that produce taxable business income by investing in fixed-income bonds and other debt instruments. Under tax law, even tax-exempt U.S. institutions may face a 35% tax if they invest directly in such hedge funds. By investing instead through a Bermuda corporation, the taxes are legally blocked, experts say.

Of course all of this is perfectly legal.

So nobody gets into trouble for any of this.

By keeping money offshore, even those managing these kinds of funds can avoid being taxed.

Victor Fleischer, a tax professor at the University of Colorado Law School, recently explained how this works….

“The idea behind some of the Cayman Island strategies was that the income that the fund managers receive for managing the money would be kept offshore in the Cayman Island — and the chief benefit is that you can defer when you recognize that income until a later date and you can reinvest the money from the Cayman islands and none of those reinvested funds get taxed until you bring them back either”

So was Romney doing this?

We may never know unless he shows us his tax returns.

What we do know is that Romney has millions of dollars of his own personal wealth invested in offshore tax havens.

The following comes from ABC News….

In addition to paying the lower tax rate on his investment income, Romney has as much as $8 million invested in at least 12 funds listed on a Cayman Islands registry. Another investment, which Romney reports as being worth between $5 million and $25 million, shows up on securities records as having been domiciled in the Caymans.

But Romney does not just have money invested down in the Cayman Islands.  Apparently his money is invested in a whole host of offshore tax havens.

The following quote comes from a Reuters article….

Bain funds in which Romney is invested are scattered from Delaware to the Cayman Islands and Bermuda, Ireland and Hong Kong, according to a Reuters analysis of securities filings.

So is there anything wrong with this?

Well, it depends on how you define “wrong”.

What Romney is doing is perfectly legal.

But it also stinks.  Washington lawyer Jack Blum recently told ABC News the following about Romney’s finances….

“His personal finances are a poster child of what’s wrong with the American tax system”

So now we may have a few hints as to why Romney may not want to release his old tax returns.

But as noted above, what Romney is doing is just small potatoes compared to what the ultra-wealthy do.

The U.S. Congress has been trying to clamp down on offshore banking, but the ultra-wealthy are always two or three steps ahead of them.

The ultra-wealthy will go to just about any extreme in order to avoid paying taxes.

In fact, the Washington Post has reported that an increasing number of wealthy individuals are actually deciding to renounce their citizenship rather than face the wrath of the IRS.

The ultra-wealthy aren’t really concerned that much with national citizenship anyway.  If they want to influence an election, they can have far more influence by donating a few million bucks to a “Super PAC” than they can by casting the few votes that they have.

In a previous article, I described how the ultra-wealthy use offshore banks as a “shadow banking system” that plays by rules that most people don’t even know exist….

It is a shadow banking system that most Americans don’t know anything about. Most Americans don’t have the resources to be able to set up shell companies in half a dozen different countries so that they can “filter” their profits.  Most Americans don’t know a thing about complicated tax avoidance plans that tax lawyers use such as the “Double Irish” and the “Dutch Sandwich”.  Most Americans would have no idea how to eventually have most of the money that they make end up in Bermuda so that it can avoid taxes.

Most among the global elite simply do not care that U.S. debt is climbing into the stratosphere.  All they care about is keeping as much of their own money in their pockets as they possibly can.

Of course there are always exceptions to this rule.  Warren Buffett recently wrote a check to the U.S. Treasury for a little more than $49,000 to help pay off the national debt.

But considering the fact that the U.S. national debt is increasing by more than 100 million dollars an hour, that didn’t exactly do much to help.

Our system is deeply broken and the global elite are getting away with bloody murder.  Over the decades, they have carefully crafted the rules so that as much wealth as possible is funneled into their pockets, and they have carefully crafted the rules so that as much wealth as possible stays in their pockets.

Of course if we got rid of the personal income tax and the corporate income tax entirely and replaced them with a completely new system we could get rid of all of this game playing once and for all.

But what do you think the odds are of that happening?

Have You Heard About The 16 Trillion Dollar Bailout The Federal Reserve Handed To The Too Big To Fail Banks?

What you are about to read should absolutely astound you.  During the last financial crisis, the Federal Reserve secretly conducted the biggest bailout in the history of the world, and the Fed fought in court for several years to keep it a secret.  Do you remember the TARP bailout?  The American people were absolutely outraged that the federal government spent 700 billion dollars bailing out the “too big to fail” banks.  Well, that bailout was pocket change compared to what the Federal Reserve did.  As you will see documented below, the Federal Reserve actually handed more than 16 trillion dollars in nearly interest-free money to the “too big to fail” banks between 2007 and 2010.  So have you heard about this on the nightly news?  Probably not.  Lately Bloomberg has been reporting on some of this, but even they are not giving people the whole picture.  The American people need to be told about this 16 trillion dollar bailout, because it is a perfect example of why the Federal Reserve needs to be shut down.  The Federal Reserve has been actively picking “winners” and “losers” in the financial system, and it turns out that the “friends” of the Fed always get bailed out and always end up among the “winners”.  This is not how a free market system is supposed to work.

According to the limited GAO audit of the Federal Reserve that was mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act, the grand total of all the secret bailouts conducted by the Federal Reserve during the last financial crisis comes to a whopping $16.1 trillion.

That is an astonishing amount of money.

Keep in mind that the GDP of the United States for the entire year of 2010 was only 14.58 trillion dollars.

The total U.S. national debt is only a bit above 15 trillion dollars right now.

So 16 trillion dollars is an almost inconceivable amount of money.

But some other dollar figures have been thrown around lately regarding these secret Federal Reserve bailouts.  Let’s take a look at them and see what they mean.

$1.2 Trillion

A recent Bloomberg article made the following statement….

The $1.2 trillion peak on Dec. 5, 2008 — the combined outstanding balance under the seven programs tallied by Bloomberg — was almost three times the size of the U.S. federal budget deficit that year and more than the total earnings of all federally insured banks in the U.S. for the decade through 2010, according to data compiled by Bloomberg.

The $1.2 trillion figure represents the peak outstanding balance on these loans, not the total amount of all the loans.  On December 5, 2008 the “too big to fail” banks owed this much money to the Federal Reserve.  Many of them could not pay these short-term loans back right away and had to keep rolling them over time after time.  Each time a short-term loan got rolled over that represented a new loan.

$7.7 Trillion

Bloomberg is reporting that the Federal Reserve had made a total of $7.77 trillion in financial commitments to the big banks by the end of March 2009….

Add up guarantees and lending limits, and the Fed had committed $7.77 trillion as of March 2009 to rescuing the financial system, more than half the value of everything produced in the U.S. that year.

But as mentioned above, a one-time limited GAO audit of the Federal Reserve that was mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act covered an even broader time period and revealed even more bailout loans.

According to the GAO audit, $16.1 trillion in secret loans were made by the Federal Reserve between December 1, 2007 and July 21, 2010.  The following list of firms and the amount of money that they received was taken directly from page 131 of the GAO audit report….

Citigroup – $2.513 trillion
Morgan Stanley – $2.041 trillion
Merrill Lynch – $1.949 trillion
Bank of America – $1.344 trillion
Barclays PLC – $868 billion
Bear Sterns – $853 billion
Goldman Sachs – $814 billion
Royal Bank of Scotland – $541 billion
JP Morgan Chase – $391 billion
Deutsche Bank – $354 billion
UBS – $287 billion
Credit Suisse – $262 billion
Lehman Brothers – $183 billion
Bank of Scotland – $181 billion
BNP Paribas – $175 billion
Wells Fargo – $159 billion
Dexia – $159 billion
Wachovia – $142 billion
Dresdner Bank – $135 billion
Societe Generale – $124 billion
“All Other Borrowers” – $2.639 trillion

This report was made available to all the members of Congress, but most of them have been totally silent about it.  One of the only members of Congress that has said something has been U.S. Senator Bernie Sanders.

The following is an excerpt from a statement about this audit that was taken from the official website of Senator Sanders….

“As a result of this audit, we now know that the Federal Reserve provided more than $16 trillion in total financial assistance to some of the largest financial institutions and corporations in the United States and throughout the world”

So where is everyone else?

Why aren’t leading Republicans and leading Democrats crying bloody murder over this report?

This scandal should have been front page news for months when it was revealed.

But it wasn’t.

And Guess what?

Not only did the Federal Reserve give 16.1 trillion dollars in nearly interest-free loans to the “too big to fail” banks, the Fed also paid them over 600 million dollars to help run the emergency lending program.  According to the GAO, the Federal Reserve shelled out an astounding $659.4 million in “fees” to the very financial institutions which caused the financial crisis in the first place.

In addition, it turns out that trillions of dollars of this bailout money actually went overseas.  According to the GAO audit, approximately $3.08 trillion went to foreign banks in Europe and in Asia.

So why were our dollars being used to bail out foreign banks while tens of millions of American families were deeply suffering?

That is a very good question.

Also, it is important to remember that many of these bailout loans were made at below market interest rates, and this enabled many of these financial institutions to rake in huge profits.

According to a recent Bloomberg article, the big banks brought in an estimated $13 billion by taking advantage of the Fed’s below-market rates….

While the Fed’s last-resort lending programs generally charge above-market interest rates to deter routine borrowing, that practice sometimes flipped during the crisis. On Oct. 20, 2008, for example, the central bank agreed to make $113.3 billion of 28-day loans through its Term Auction Facility at a rate of 1.1 percent, according to a press release at the time.

The rate was less than a third of the 3.8 percent that banks were charging each other to make one-month loans on that day. Bank of America and Wachovia Corp. each got $15 billion of the 1.1 percent TAF loans, followed by Royal Bank of Scotland’s RBS Citizens NA unit with $10 billion, Fed data show.

So once the financial crisis was over, were adjustments made to the financial system to make sure that this type of thing would never happen again?

Of course not.

Today, the “too big to fail” banks are larger than ever.  The total assets of the six largest U.S. banks increased by 39 percent between September 30, 2006 and September 30, 2011.

So now they are more “too big to fail” than ever.

But this is what happens when we allow unelected central bank bureaucrats to run our financial system.

Most Americans do not realize this, but the truth is that the Federal Reserve is not part of the government.  In fact, it is about as “federal” as Federal Express is.  The Federal Reserve has admitted that they are a privately owned institution in court many times, and you can see video of a Federal Reserve employee admitting that the Federal Reserve is privately owned right here.

The Federal Reserve is an out of control monster that is throwing around trillions of dollars whenever it wants to.  Nobody should be allowed to do this.  Nobody should be allowed to give bailouts to banks and corporations without the express permission of the U.S. Congress and the president of the United States.

This is a point that I made in my article yesterday.  The Federal Reserve decided this week that it is going to provide “liquidity support” to Europe.  If the American people do not like this move, that is just too bad.  We do not get a say in the matter.

Are you starting to understand why I keep pushing the idea that it is time to shut down the Federal Reserve?

Please share this information about the secret 16 trillion dollar Federal Reserve bailout with your family and your friends.

If we can get enough people to wake up, perhaps there is still time to change the direction that this country is headed.

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