Financial

Who Controls The Global Economy? Do Not Underestimate The Power Of The Big Banks

Great Seal - Photo by IpankoninAre the big banks really as powerful as some people say that they are?  Do they really control the global economy?  If y0u asked most people, they would tell you that governments control the global economy.  But the campaigns of our politicians are funded by the ultra-wealthy, the big banks and the large corporations that they control.  Others would tell you that the Federal Reserve and the rest of the central banks around the world control the global economy.  But the truth is that the Federal Reserve was established by the bankers and for the benefit of the bankers.  As you will see below, at the very core of the global economy there exists a “super-entity” of financial institutions that control an almost unimaginable amount of wealth and power.  These financial institutions and the ultra-wealthy individuals behind them are really the ones that are pulling all the strings.  In this world money equals power, and the borrower is the servant of the lender.  When you follow the pyramid all the way to the top, it begins to become very clear who really is in control.

In business schools all over America today, instead of dreaming of starting new businesses and contributing something positive to society, most business students are dreaming of going to Wall Street and getting rich.  But Wall Street doesn’t actually create or build anything of value for society.  Instead, the bankers make most of their profits by essentially pushing money and paper around.  In a recent article, Chris Martenson commented on this…

Today, some of the most celebrated individuals and institutions are ensconced within the financial industry; in banks, hedge funds, and private equity firms. Which is odd because none of these firms or individuals actually make anything, which society might point to as additive to our living standards. Instead, these financial magicians harvest value from the rest of society that has to work hard to produce real things of real value.

While the work they do is quite sophisticated and takes a lot of skill, very few of these firms direct capital to new efforts, new products, and new innovations. Instead they either trade in the secondary markets for equities, bonds, derivatives, and the like, which perform the ‘service’ of moving paper from one location to another while generating ‘profits.’ Or, in the case of banks, they create money out of thin air and lend it out – at interest of course.

But just because they aren’t adding much value to society does not mean that these big banks are not extremely powerful.  In fact, anyone that underestimates that power of these monolithic financial institutions is being quite foolish.

A team of researchers at the Swiss Federal Institute of Technology in Zurich studied the relationships between 37 million companies and investors worldwide, and what they found was absolutely stunning.

What they discovered is that there is a “super-entity” of just 147 very tightly knit companies that controls 40 percent of the entire network…

When the team further untangled the web of ownership, it found much of it tracked back to a “super-entity” of 147 even more tightly knit companies – all of their ownership was held by other members of the super-entity – that controlled 40 per cent of the total wealth in the network. “In effect, less than 1 per cent of the companies were able to control 40 per cent of the entire network,” says Glattfelder. Most were financial institutions. The top 20 included Barclays Bank, JPMorgan Chase & Co, and The Goldman Sachs Group.

So exactly who are the companies that are at the core of this “super-entity”?

Well, almost all of them are banks or financial institutions.  The following is a list of the 50 “most connected” companies from the study, and the notes in parentheses are from Chris Martenson…

1. Barclays plc
2. Capital Group Companies Inc (Investment Management)
3. FMR Corporation (Financial Services)
4. AXA (Investments & Life Insurance)
5. State Street Corporation (Investment Management)
6. JP Morgan Chase & Co (Bank)
7. Legal & General Group plc (Investments & Life Insurance)
8. Vanguard Group Inc (Investment Management)
9. UBS AG (Bank)
10. Merrill Lynch & Co Inc (Bank)
11. Wellington Management Co LLP (Investment Management)
12. Deutsche Bank AG (Bank)
13. Franklin Resources Inc (Investment Management)
14. Credit Suisse Group (Bank)
15. Walton Enterprises LLC
16. Bank of New York Mellon Corp (Bank)
17. Natixis (Investment Management)
18. Goldman Sachs Group Inc (Bank)
19. T Rowe Price Group Inc (Investment Management)
20. Legg Mason Inc (Investment Management)
21. Morgan Stanley (Bank)
22. Mitsubishi UFJ Financial Group Inc (Bank)
23. Northern Trust Corporation (Investment Management)
24. Société Générale (Bank)
25. Bank of America Corporation (Bank)
26. Lloyds TSB Group plc (Bank)
27. Invesco plc (Investment mgmt) 28. Allianz SE 29. TIAA (Investments & Insurance)
30. Old Mutual Public Limited Company (Investments & Insurance)
31. Aviva plc (Insurance)
32. Schroders plc (Investment Management)
33. Dodge & Cox (Investment Management)
34. Lehman Brothers Holdings Inc* (Bank)
35. Sun Life Financial Inc (Investments & Insurance)
36. Standard Life plc (Investments & Insurance)
37. CNCE
38. Nomura Holdings Inc (Investments and Financial Services)
39. The Depository Trust Company (Securities Depository)
40. Massachusetts Mutual Life Insurance
41. ING Groep NV (Bank, Investments & Insurance)
42. Brandes Investment Partners LP (Financial Services)
43. Unicredito Italiano SPA (Bank)
44. Deposit Insurance Corporation of Japan (Owns a lot of banks’ shares in Japan)
45. Vereniging Aegon (Investments & Insurance)
46. BNP Paribas (Bank)
47. Affiliated Managers Group Inc (Owns stakes in 27 money management firms)
48. Resona Holdings Inc (Banking Group in Japan)
49. Capital Group International Inc (Investments and Financial Services)
50. China Petrochemical Group Company

Are you starting to get the idea?

The global economy truly is completely dominated by banks and other financial institutions.

In the United States, the big banks are not just content to own other companies anymore.  Now, some of our largest banks are actually starting to directly get into businesses such as “electric power production, oil refining and distribution, owning and operating of public assets such as ports and airports, and even uranium mining”.  The following is an excerpt from a letter that several members of the U.S. Congress recently sent to Federal Reserve Chairman Ben Bernanke…

We write in regards to the expansion of large banks into what had traditionally been non-financial commercial spheres. Specifically, we are concerned about how large banks have recently expanded their businesses into such fields as electric power production, oil refining and distribution, owning and operating of public assets such as ports and airports, and even uranium mining.

Here are a few examples. Morgan Stanley imported 4 million barrels of oil and petroleum products into the United States in June, 2012. Goldman Sachs stores aluminum in vast warehouses in Detroit as well as serving as a commodities derivatives dealer. This “bank” is also expanding into the ownership and operation of airports, toll roads, and ports. JP Morgan markets electricity in California.

In other words, Goldman Sachs, JP Morgan, and Morgan Stanley are no longer just banks – they have effectively become oil companies, port and airport operators, commodities dealers, and electric utilities as well. This is causing unforeseen problems for the industrial sector of the economy. For example, Coca Cola has filed a complaint with the London Metal Exchange that Goldman Sachs was hoarding aluminum. JP Morgan is currently being probed by regulators for manipulating power prices in California, where the “bank” was marketing electricity from power plants it controlled. We don’t know what other price manipulation could be occurring due to potential informational advantages accruing to derivatives dealers who also market and sell commodities. The long shadow of Enron could loom in these activities.

You can read the rest of their letter right here.

This week, Goldman Sachs has been facing allegations that it has cost American consumers billions of dollars by manipulating the price of aluminum.  The following is from an article that was posted on CNBC…

Hundreds of millions of times a day, thirsty Americans open a can of soda, beer or juice. And every time they do it, they pay a fraction of a penny more because of a shrewd maneuver by Goldman Sachs and other financial players that ultimately costs consumers billions of dollars.

The story of how this works begins in 27 industrial warehouses in the Detroit area where Goldman stores customers’ aluminum. Each day, a fleet of trucks shuffles 1,500-pound bars of the metal among the warehouses. Two or three times a day, sometimes more, the drivers make the same circuits. They load in one warehouse. They unload in another. And then they do it again.

This industrial dance has been choreographed by Goldman to exploit pricing regulations set up by an overseas commodities exchange, an investigation by The New York Times has found. The back–and-forth lengthens the storage time. And that adds many millions a year to the coffers of Goldman, which owns the warehouses and charges rent to store the metal. It also increases prices paid by manufacturers and consumers across the country.

If that sounds shady to you, that is because it is shady.

But as the big banks continue to gain even more power in our society, this kind of thing will become even more common.

So what can we do about it?

Not much.

Do you think that the media will tell us the truth about all of this?  I wouldn’t count on it.  At this point, there are just six giant media corporations that control more than 90 percent of the news and entertainment that you see on your television.  And those six giant media corporations are very hesitant to do anything that will damage their corporate owners or their corporate advertisers.

Do you think that our politicians will do anything about all of this?  I wouldn’t count on it.  In national elections, the candidate that raises more money wins more than 80 percent of the time.  Our politicians know where their bread is buttered, and as history has shown most of them are very good to the guys with the big checkbooks.

As I said at the top of this article, money is power, and according to a report that was released last summer, the global elite have up to 32 TRILLION dollars stashed in offshore banks around the globe.

The global economy belongs to them.  We are just living in it.

But hopefully if enough people start waking up, someday we will see some significant changes.

One of my favorite musical artists of all-time, Michael W. Smith, once wrote a song that contained the following lyrics…

Tell me, how long will we grovel at the feet of wealth and power?

Tell me, how long will we bow down to that golden calf, now?

(How long will be too long)

Will the people of the world ever get sick and tired of the overwhelming power of the big banks and start demanding changes?

That is a very good question.  Please feel free to share what you think by posting a comment below…

The Tip Of The Iceberg Of The Coming Retirement Crisis That Will Shake America To The Core

RetirementThe pension nightmare that is at the heart of the horrific financial crisis in Detroit is just the tip of the iceberg of the coming retirement crisis that will shake America to the core.  Right now, more than 10,000 Baby Boomers are hitting the age of 65 every single day, and this will continue to happen every single day until the year 2030.  As a society, we have made trillions of dollars of financial promises to these Baby Boomers, and there is no way that we are going to be able to keep those promises.  The money simply is not there.  Yes, I suppose that we could eventually see a “super devaluation” of the U.S. dollar and keep our promises to the Baby Boomers using currency that is not worth much more than Monopoly money, but as it stands right now we simply do not have the resources to do what we said that we were going to do.  The number of senior citizens in the United States is projected to more than double by the middle of the century, and it would have been nearly impossible to support them all even if we weren’t in the midst of a long-term economic decline.  Tens of millions of Americans that are eagerly looking forward to retirement are going to be in for a very rude awakening in the years ahead.  There is going to be a lot of heartache and a lot of broken promises.

What is going on in Detroit right now is a perfect example of what will soon be happening all over the nation.  Many city workers stuck with their jobs for decades because of the promise of a nice pension at the end of the rainbow.  But now those promises are going up in smoke.  There has even been talk that retirees will only end up getting about 10 cents for every dollar that they were promised.

Needless to say, many pensioners are extremely angry that the promises that were made to them are not going to be kept.  The following is from a recent article in the New York Times…

Many retirees see the plan to cut their pensions as a betrayal, saying that they kept their end of a deal but that the city is now reneging. Retired city workers, police officers and 911 operators said in interviews that the promise of reliable retirement income had helped draw them to work for the City of Detroit in the first place, even if they sometimes had to accept smaller salaries or work nights or weekends.

“Does Detroit have a problem?” asked William Shine, 76, a retired police sergeant. “Absolutely. Did I create it? I don’t think so. They made me some promises, and I made them some promises. I kept my promises. They’re not going to keep theirs.”

But Detroit is far from an isolated case.  As Detroit Mayor Dave Bing said the other day, many other cities are heading down the exact same path…

“We may be one of the first. We are the largest. But we absolutely will not be the last.”

Yes, Detroit’s financial problems are immense.  But other major U.S. cities are facing unfunded pension liabilities that are even worse.

For example, here are the unfunded pension liabilities for four financially-troubled large U.S. cities…

Detroit: $3.5 billion

Baltimore: $680 million

Los Angeles: $9.4 billion

Chicago: $19 billion

When you break it down on a per citizen basis, Detroit is actually in better shape than the others…

Detroit: $7,145

Baltimore: $7,247

Los Angeles: $8,437

Chicago: $13,355

And many state governments are in similar shape.  Right now, the state of Illinois has unfunded pension liabilities that total approximately $100 billion.

There are some financial “journalists” out there that are attempting to downplay this problem, but sticking our heads in the sand is not going to make any of this go away.

According to Northwestern University Professor John Rauh, the total amount of unfunded pension and healthcare obligations for retirees that state and local governments across the United States have accumulated is 4.4 trillion dollars.

So where are they going to get that money?

They are going to raise your taxes of course.

Just check out what is happening right now in Scranton, Pennsylvania…

Scranton taxpayers could face a 117 percent increase in taxes next year as the city’s finances continue to spiral out of control.

A new analysis by the Pennsylvania Economy League projects an $18 million deficit for 2014, an amount so massive it outpaces the approximate $17 million the struggling city collects annually

A 117 percent tax increase?

What would Dwight Schrute think of that?

Perhaps you are reading this and you are assuming that your retirement is secure because you work in the private sector.

Well, just remember what happened to your 401k during the financial crisis of 2008.  During the next major stock market crash, your 401k will likely get absolutely shredded.  Many Americans will probably see the value of their 401k accounts go down by 50 percent or more.

And if you have stashed your retirement funds with the wrong firm, you could end up losing everything.  Just ask anyone that had their nest eggs invested with MF Global.

But of course most Americans are woefully behind on saving for retirement anyway.  A study conducted by Boston College’s Center for Retirement Research found that American workers are $6.6 trillion short of what they need to retire comfortably.

That certainly isn’t good news.

On top of everything else, the federal government has been recklessly irresponsible as far as planning for the retirement of the Baby Boomers is concerned.

As I noted yesterday, the U.S. government is facing a total of 222 trillion dollars in unfunded liabilities.  Social Security and Medicare make up the bulk of that.

At this point, the number of Americans on Medicare is projected to grow from a little bit more than 50 million today to 73.2 million in 2025.

The number of Americans collecting Social Security benefits is projected to grow from about 56 million today to 91 million in 2035.

How is a society with a steadily declining economy going to care for them all adequately?

Yes, we truly are careening toward disaster.

If you are not convinced yet, here are some more numbers.  The following stats are from one of my previous articles entitled “Do You Want To Scare A Baby Boomer?“…

1. Right now, there are somewhere around 40 million senior citizens in the United States.  By 2050 that number is projected to skyrocket to 89 million.

2. According to one recent poll, 25 percent of all Americans in the 46 to 64-year-old age bracket have no retirement savings at all.

3. 26 percent of all Americans in the 46 to 64-year-old age bracket have no personal savings whatsoever.

4. One survey that covered all American workers found that 46 percent of them have less than $10,000 saved for retirement.

5. According to a survey conducted by the Employee Benefit Research Institute, “60 percent of American workers said the total value of their savings and investments is less than $25,000”.

6. A Pew Research survey found that half of all Baby Boomers say that their household financial situations have deteriorated over the past year.

7. 67 percent of all American workers believe that they “are a little or a lot behind schedule on saving for retirement”.

8. Today, one out of every six elderly Americans lives below the federal poverty line.

9. More elderly Americans than ever are finding that they must continue working once they reach their retirement years.  Between 1985 and 2010, the percentage of Americans in the 65 to 69-year-old age bracket that were still working increased from 18 percent to 32 percent.

10. Back in 1991, half of all American workers planned to retire before they reached the age of 65.  Today, that number has declined to 23 percent.

11. According to one recent survey, 70 percent of all American workers expect to continue working once they are “retired”.

12. According to a poll conducted by AARP, 40 percent of all Baby Boomers plan to work “until they drop”.

13. A poll conducted by CESI Debt Solutions found that 56 percent of American retirees still had outstanding debts when they retired.

14. Elderly Americans tend to carry much higher balances on their credit cards than younger Americans do.  The following is from a recent CNBC article…

New research from the AARP also shows that those ages 50 and over are carrying higher balances on their credit cards — $8,278 in 2012 compared to $6,258 for the under-50 population.

15. A study by a law professor at the University of Michigan found that Americans that are 55 years of age or older now account for 20 percent of all bankruptcies in the United States.  Back in 2001, they only accounted for 12 percent of all bankruptcies.

16. Between 1991 and 2007 the number of Americans between the ages of 65 and 74 that filed for bankruptcy rose by a staggering 178 percent.

17. What is causing most of these bankruptcies among the elderly?  The number one cause is medical bills.  According to a report published in The American Journal of Medicine, medical bills are a major factor in more than 60 percent of the personal bankruptcies in the United States.  Of those bankruptcies that were caused by medical bills, approximately 75 percent of them involved individuals that actually did have health insurance.

18. In 1945, there were 42 workers for every retiree receiving Social Security benefits.  Today, that number has fallen to 2.5 workers, and if you eliminate all government workers, that leaves only 1.6 private sector workers for every retiree receiving Social Security benefits.

19. Millions of elderly Americans these days are finding it very difficult to survive on just a Social Security check.  The truth is that most Social Security checks simply are not that large.  The following comes directly from the Social Security Administration website…

The average monthly Social Security benefit for a retired worker was about $1,230 at the beginning of 2012. This amount changes monthly based upon the total amount of all benefits paid and the total number of people receiving benefits.

You can view the rest of the statistics right here.

Sadly, most Americans are not aware of these things.

The mainstream media keeps most of the population entertained with distractions.  This week it is the birth of the royal baby, and next week it will be something else.

Meanwhile, our problems just continue to get worse and worse.

There is no way in the world that we are going to be able to keep all of the financial promises that we have made to the Baby Boomers.  A lot of them are going to end up bitterly disappointed.

All of this could have been avoided if we would have planned ahead as a society.

But that did not happen, and now we are all going to pay the price for it.

10 Reasons Why The Global Economy Is About To Experience Its Own Version Of “Sharknado”

SharknadoHave you ever seen a disaster movie that is so bad that it is actually good?  Well, that is exactly what Syfy’s new television movie entitled “Sharknado” is.  In the movie, wild weather patterns actually cause man-eating sharks to come flying out of the sky.  It sounds absolutely ridiculous, and it is.  You can view the trailer for the movie right here.  Unfortunately, we are witnessing something just as ridiculous in the real world right now.  In the United States, the mainstream media is breathlessly proclaiming that the U.S. economy is in great shape because job growth is “accelerating” (even though we actually lost 240,000 full-time jobs last month) and because the U.S. stock market set new all-time highs this week.  The mainstream media seems to be absolutely oblivious to all of the financial storm clouds that are gathering on the horizon.  The conditions for a “perfect storm” are rapidly developing, and by the time this is all over we may be wishing that flying sharks were all that we had to deal with.  The following are 10 reasons why the global economy is about to experience its own version of “Sharknado”…

#1 The financial situation in Portugal continues to deteriorate thanks to an emerging political crisis.  It all began last week when Portuguese finance minister Vitor Gaspar resigned…

“Mr. Gaspar’s resignation on July 1 has opened a Pandora’s box,” says Nicholas Spiro, managing director of Spiro Sovereign Strategy. “Portuguese politicians from the President down are treating the exit of Mr. Gaspar, the architect of the fiscal and structural reforms demanded by the troika, as a green light for a public debate about the bail-out programme. Yet the manner in which this debate is taking place, with the President undermining the prime minister and the opposition leader seeking to renegotiate the terms of the programme, is spooking markets.”

The general population is becoming increasingly restless as the nation plunges down the exact same path that Greece has gone.  Nobody seems to have any solutions as the economic problems continue to escalate.  According to Reuters, the president of Portugal has added fuel to the fire by calling for early elections next year…

Portugal’s president threw the bailed-out euro zone country into disarray on Thursday after rejecting a plan to heal a government rift, igniting what critics called a “time bomb” by calling for early elections next year.

Due to all of this instability in Portugal, the yield on Portuguese bonds shot up to 7.51% this week.  That is a very bad sign.

#2 The economic depression in Greece continues to deepen, and it is being reported that Greece will not even come close to hitting the austerity targets that it was supposed to hit this year…

A leaked report from the European Commission confirms that Greece will miss its austerity targets yet again by a wide margin. It alleges that Greece lacks the “willingness and capacity” to collect taxes. In fact, Athens is missing targets because the economy is still in freefall and that is because of austerity overkill. The Greek think-tank IOBE expects GDP to fall 5pc this year. It has told journalists privately that the final figure may be -7pc.

Another 7 percent contraction for the Greek economy?

It has already been contracting steadily for years.

At this point, it would be hard to overstate how bad economic conditions inside Greece are.  The following is from a recent article by Simon Black…

My friend Illias took a drag of his cigarette as he contemplated my question.

“Our government tells us that this will be a better year. No one really believes them. But all we can do is be optimistic. Too many people are committing suicide.”

His statement probably best sums up the situation in Greece right now. It’s as if the hopelessness has gone stale, and the only thing they have to replace it with is desperate, misguided, faux-optimism. And anger.

There are roughly 11 million people in this country. 3.4 million of them are employed, of which roughly one third work for the government.

1.34 million people are ‘officially’ unemployed. To put this in context, it would be as if there were 36 million officially unemployed in the US.

More startling, if you add the number of ‘inactive’ workers (i.e. those who gave up looking), the total number of unemployed is roughly 57% of the entire Greek work force.

#3 The economic crisis in the third largest country in the eurozone, Italy, has taken another turn for the worse.  The unemployment rate in Italy is up to 12.2 percent, which is the highest in 35 years.  An average of 134 retail outlets are shutting down in Italy every single day, and the debt of the country has been downgraded again to just above junk status…

Italy’s slow crisis is again flaring up. Its debt trajectory has punched through the danger line over the past two years. The country’s €2.1 trillion (£1.8 trillion) debt – 129pc of GDP – may already be beyond the point of no return for a country without its own currency.

Standard & Poor’s did not say this outright when it downgraded the country to near-junk BBB on Tuesday. But if you read between the lines, it is close to saying the game is up for Italy.

#4 There are rumors that some of the biggest banks in the world are in very serious trouble.  For example, Jim Willie (a financial writer who usually puts out really solid information) is insisting that Deutsche Bank is on the verge of collapse…

The best information coming to my desk indicates that three major Western banks are under constant threat of failure overnight, every night, forcing extraordinary measures to avoid failure. They are Deutsche Bank in Germany, Barclays in London, and Citibank in New York. Judging from the ongoing defense from prosecution and cooperation (flipped) with Interpol and distraction of resources, the most likely bank to die next is Deutsche Bank. They are caught with accounting fraud and outright financial fraud over collateral shell games, pertaining to USTreasury Bonds, other sovereign bonds in Southern Europe, and OTC derivatives linked to FOREX currency contracts. D-Bank is a dead man walking.

Time will tell if he is right.  But without a doubt the global financial system is extremely vulnerable right now.

Most Americans assume that the problems that caused the financial crash of 2008 were fixed, but that is most definitely NOT the case.  In fact, our financial system is far more shaky today than it was just before the last financial crisis.  When one major bank goes down, we could start to see others fall like dominoes.

#5 Just before the financial crisis of 2008, the price of oil spiked dramatically.  Well, it is starting to happen again.  The price of oil hit $106 a barrel on Friday.  If the price of oil continues to rise at this pace, it is going to mean big trouble for economies all over the planet.

And as I wrote about recently, every time the average price of a gallon of gasoline in the United States has risen above $3.80 during the past three years, a stock market decline has always followed.

The average price of a gallon of gasoline in the United States reached $3.55 on Friday.  This is a number to keep a close eye on.

#6 Mortgage rates are absolutely skyrocketing right now…

The average U.S. rate on the 30-year fixed mortgage rose this week to 4.51%, a two-year high. Rates have been rising on expectations that the Federal Reserve will slow its bond purchases this year.

Mortgage buyer Freddie Mac said Thursday that the average on the 30-year loan jumped from 4.29% the previous week. Just two months ago, it was 3.35% — barely above the record low of 3.31%.

This threatens to throw the U.S. real estate market into a slowdown worse than anything we have seen since the last recession.

#7 This upcoming corporate earnings season is shaping up to be an extremely disappointing one.  In fact, the percentage of companies issuing negative earnings guidance for this quarter is at a level that we have never seen before.

So is this a sign that economic activity is starting to slow down significantly?

#8 U.S. stocks are massively overextended right now.  In fact, according to Graham Summers, this is the most overextended stocks have been in the past 20 years…

Today, the S&P 500 is sitting a full 30% above its 200-weekly moving average. We have NEVER been this overextended above this line at any point in the last 20 years.

#9 Rapidly rising interest rates are causing the bond market to begin to come apart at the seams.  There is concern that the 30 year bull market for bonds is now over and investors are starting to pull their money out of the market at a staggering rate.  In fact, 80 billion dollars was pulled out of bond funds during June alone.

#10 Rapidly rising interest rates could cause an implosion of the derivatives market at any moment.  As I am so fond of reminding everyone, there are approximately 441 trillion dollars worth of interest rate derivatives out there.

If interest rates continue to soar, we could potentially see a financial disaster that is absolutely unprecedented, and the too big to fail banks would be the most vulnerable.

As USA Today recently reported, there are just five major banks that absolutely dominate derivatives trading in the United States…

Five of the biggest U.S. banks — JPMorgan, Goldman Sachs Group Inc., Bank of America Corp., Citigroup Inc. and Morgan Stanley — account for more than 90% of derivatives contracts. Regulators estimate that nearly half of derivatives are traded outside the United States.

Could you imagine the financial devastation that we would see if several of those banks started to collapse at the same time?

When you hear the mainstream media begin to talk about a “derivatives crisis” involving major banks, that will be a sign that disaster is upon us.

Most Americans don’t realize that Wall Street has been transformed into the largest casino in the history of the world.  Most Americans don’t realize that the major banks are literally walking a financial tightrope each and every day.

All it is going to take is one false step and we will be looking at a financial crisis even worse than what happened back in 2008.

So enjoy this little bubble of false prosperity while you can.

It is not going to last for too much longer.

The Federal Reserve Is Paying Banks NOT To Lend 1.8 Trillion Dollars To The American People

House Of Cards - Photo by ArealastDid you know that U.S. banks have more than 1.8 trillion dollars parked at the Federal Reserve and that the Fed is actually paying them not to lend that money to us?  We were always told that the goal of quantitative easing was to “help the economy”, but the truth is that the vast majority of the money that the Fed has created through quantitative easing has not even gotten into the system.  Instead, most of it is sitting at the Fed slowly earning interest for the bankers.  Back in October 2008, just as the last financial crisis was starting, Federal Reserve Chairman Ben Bernanke announced that the Federal Reserve would start paying interest on the reserves that banks keep at the Fed.  This caused an absolute explosion in the size of these reserves.  Back in 2008, U.S. banks had less than 2 billion dollars of excess reserves parked at the Fed.  Today, they have more than 1.8 trillion.  In less than five years, the pile of excess reserves has gotten nearly 1,000 times larger.  This is utter insanity, and it will have very serious consequences down the road.

Posted below is a chart that shows the explosive growth of these excess reserves in recent years…

Excess Reserves

This explains why all of the crazy money printing that the Fed has been doing has not caused tremendous inflation yet.  Most of the money has not even gotten into the economy.  The Fed has been paying banks not to lend it out.

But now that big pile of money is sitting out there, and at some point it is going to come pouring in to the U.S. economy.  When that happens, we could very well see an absolutely massive tsunami of inflation.

Posted below is a chart that shows the growth of the M2 money supply over the past several decades.  It has been fairly steady, but imagine what would happen if you took the hockey stick from the chart above and suddenly added it to the top of this one…

M2 Money Supply

The longer that the Federal Reserve continues to engage in quantitative easing and continues to pay banks not to lend that money out to the rest of us, the larger that inflationary time bomb is going to become.

In a recent article for the Huffington Post, Professor Robert Auerbach of the University of Texas explained the nightmarish situation that we are facing…

One reason that the excess reserves grew to an extraordinary level is that in October 2008, one month after the financial crisis when Lehman Brothers went bankrupt, the Bernanke Fed began paying interest on bank reserves. Although it has been 1/4 of 1 percent interest, this risk free rate was not low compared to the Fed’s policy of keeping short-term market rates near zero. The interest banks received was and is an incentive to hold the excess reserves rather than lend to consumers and businesses in the risky environment of the major recession and the slow recovery.

The Bernanke Fed is now facing a $1.863 trillion time bomb, they helped to create, of excess reserves in the private banking system. If rates of interest on income earning assets (including bank loans to consumers and businesses) rise, the Fed will have to pay the banks more interest to hold their excess reserves.

If interest rates move up dramatically (and they are already starting to rise significantly), banks will have an incentive to take that money out of the Fed and start lending it out.  Professor Auerbach suggests that this could cause an “avalanche” of money pouring into the economy…

Eighty five billion a month will seem tiny compared to the avalanche of the $1.863 trillion excess reserves exploding rapidly into the economy. That would devalue the currency, cause more rapid inflation and worry investors about a coming collapse.

So the Fed has kind of painted itself into a corner.  If the Fed keeps printing money, they continue to grossly distort our financial system even more and the excess reserves time bomb just keeps getting bigger and bigger.

But even the suggestion that the Fed would begin to start “tapering” quantitative easing caused the financial markets to throw an epic temper tantrum in recent weeks.  Interest rates immediately began to skyrocket and Fed officials did their best to try to settle everyone down.

So where do we go from here?

Unfortunately, as Jim Rogers recently explained, this massive experiment in financial manipulation is ultimately going to end in disaster…

I’m afraid that in the end, we’re all going to suffer perhaps, worse than we ever have, with inflation, currency turmoil, and higher interest rates.

The Fed and other global central banks have created the largest bond bubble in the history of the planet.  If the Fed ends quantitative easing, the bond market is going to try to revert to normal.

That would be disastrous for the global financial system.  The following is what Jim Willie told Greg Hunter of USAWatchdog.com…

Everything is dependent on Fed support. They know if they take it away, they’re going to create a black hole. The Treasury bond is the greatest asset bubble in history. It’s at least twice as large as the housing and mortgage bubble, maybe three or four times as large.

But even if the central banks keep printing money, they may not be able to maintain control over the bond market.  In fact, there are already signs that they are starting to lose control.  The following is what billionaire Eric Sprott told King World News the other day…

It’s total orchestration. And it’s orchestration because they might have lost control of the bond market. I find it such a juxtaposition that central banks on a daily basis buy more bonds today than they ever purchased, and interest rates are going up, which is almost perverted. I mean how can that happen?

They’ve lost control of the market in my mind, and that’s why they are so desperately trying to get us all to forget the word ‘taper.’ In fact, we probably won’t even hear the word ‘taper’ anymore because it has such a sickening reaction to people in the bond market, and perhaps even people in the stock market. They will probably do away with the word. But the system is totally out of control. And then we’ve got this quadrillion dollars of derivatives. It just blows blows my mind to think about what could really be going on behind the scenes.

Sprott made a really good point about derivatives.

The quadrillion dollar derivatives bubble could bring down the global financial system at any time.

And remember, interest rate derivatives make up the biggest chunk of that.  Today, there are 441 trillion dollars of interest rate derivatives sitting out there.  If interest rates begin skyrocketing at some point, that is going to create some absolutely massive losses in the system.  We could potentially be talking about an event that would make the failure of Lehman Brothers look like a Sunday picnic.

We are moving into a time of great financial instability.  People are going to be absolutely shocked by what happens.

Our financial system is a house of cards built on a foundation of risk, leverage and debt.  When it all comes tumbling down, it should not be a surprise to any of us.

Not Prepared: 17 Signs That Most Americans Will Be Wiped Out By The Coming Economic Collapse

Tornado Damage - Photo by JOE M500The vast majority of Americans are going to be absolutely blindsided by what is coming.  They don’t understand how our financial system works, they don’t understand how vulnerable it is, and most of them blindly trust that our leaders know exactly what they are doing and that they will be able to fix our problems.  As a result, most Americans are simply not prepared for the massive storm that is heading our way.  Most American families are living paycheck to paycheck, most of them are not storing up emergency food and supplies, and only a very small percentage of them are buying gold and silver for investment purposes.   They seem to have forgotten what happened back in 2008.  When the financial markets crashed, millions of Americans lost their jobs.  Because most of them were living on the financial edge, millions of them also lost their homes.  Unfortunately, most Americans seem convinced that it will not happen again.  Right now we seem to be living in a “hope bubble” and people have become very complacent.  For a while there, being a “prepper” was very trendy, but now concern about a coming economic crisis seems to have subsided.  What a tragic mistake.  As I pointed out yesterday, our entire financial system is a giant Ponzi scheme, and there are already signs that our financial markets are about to implode once again.  Those that have not made any preparations for what is coming are going to regret it bitterly.  The following are 17 signs that most Americans will be wiped out by the coming economic collapse…

#1 According to a survey that was just released, 76 percent of all Americans are living paycheck to paycheck.  But most Americans are acting as if their jobs will always be there.  But the truth is that mass layoffs can occur at any time.  In fact, it just happened at one of the largest law firms in New York City.

#2 27 percent of all Americans do not have even a single penny saved up.

#3 46 percent of all Americans have $800 or less saved up.

#4 Less than one out of every four Americans has enough money stored away to cover six months of expenses.

#5 Wages continue to fall even as the cost of living continues to go up.  Today, the average income for the bottom 90 percent of all income earners in America is just $31,244.  An increasing percentage of American families are just trying to find a way to survive from month to month.

#6 62 percent of all middle class Americans say that they have had to reduce household spending over the past year.

#7 Small business is becoming an endangered species in America.  In fact, only about 7 percent of all non-farm workers in the United States are self-employed at this point.  That means that the vast majority of Americans are depending on someone else to provide them with an income.  But what is going to happen as those jobs disappear?

#8 In 1989, the debt to income ratio of the average American family was about 58 percent.  Today it is up to 154 percent.

#9 Today, a higher percentage of Americans are dependent on the government than ever before.  In fact, according to the U.S. Census Bureau 49 percent of all Americans live in a home that gets direct monetary benefits from the federal government.  So what is going to happen when the government handout gravy train comes to an end?

#10 Back in the 1970s, about one out of every 50 Americans was on food stamps.  Today, about one out of every 6.5 Americans is on food stamps.

#11 It is estimated that less than 10 percent of the U.S. population owns any gold or silver for investment purposes.

#12 It has been estimated that there are approximately 3 million “preppers” in the United States.  But that means that almost everyone else is not prepping.

#13 44 percent of all Americans do not have first-aid kits in their homes.

#14 48 percent of all Americans do not have any emergency supplies stored up.

#15 53 percent of all Americans do not have a 3 day supply of nonperishable food and water in their homes.

#16 One survey asked Americans how long they thought they would survive if the electrical grid went down for an extended period of time.  Incredibly, 21 percent said that they would survive for less than a week, an additional 28 percent said that they would survive for less than two weeks, and nearly 75 percent said that they would be dead before the two month mark.

#17 According to a survey conducted by the Adelphi University Center for Health Innovation, 55 percent of Americans believe that the government will come to their rescue when disaster strikes.

Just because you are living a comfortable middle class lifestyle today does not mean that it will always be that way.

If you doubt this, take a look at what is going on in Greece.  Many formerly middle class parents in Greece have become so impoverished that they are actually dumping their children at orphanages so that they won’t starve…

Scores of children have been put in orphanages and care homes for economic reasons; one charity said 80 of the 100 children in its residential centres were there because their families can no longer provide for them.

Ten percent of Greek children are said to be at risk of hunger. Teachers talk of cancelling PE lessons because children are underfed and of seeing pupils pick through bins for food.

If the U.S. economy crashes and you lose your job, how will you and your family survive?

Will you and your family end up homeless and totally dependent on the government for your survival?

Get prepared while there is still time.  If you do not know how to get prepared, my article entitled “25 Things That You Should Do To Get Prepared For The Coming Economic Collapse” has some basic tips, and there are dozens of excellent websites out there that teach people advanced prepping techniques for free.

So there is no excuse.  You can trust that Ben Bernanke and Barack Obama have everything under control, but as for me and my family we are going to prepare for the giant economic storm that is coming.

I hope that you will be getting prepared too.

Prepping?

18 Signs That Massive Economic Problems Are Erupting All Over The Planet

Volcano Eruption - Mount RedoubtThis is no time to be complacent.  Massive economic problems are erupting all over the globe, but most people seem to believe that everything is going to be just fine.  In fact, a whole bunch of recent polls and surveys show that the American people are starting to feel much better about how the U.S. economy is performing.  Unfortunately, the false prosperity that we are currently enjoying is not going to last much longer.  Just look at what is happening in Europe.  The eurozone is now in the midst of the longest recession that it has ever experienced.  Just look at what is happening over in Asia.  Economic growth in India is the lowest that it has been in a decade and the Japanese financial system is beginning to spin wildly out of control.  One of the only places on the entire planet where serious economic problems have not already erupted is in the United States, and that is only because we have “kicked the can down the road” by recklessly printing money and by borrowing money at an unprecedented rate.  Unfortunately, the “sugar high” produced by those foolish measures is starting to wear off.  We are going to experience a massive amount of economic pain along with the rest of the world – it is just a matter of time.

But for the moment, there are a lot of skeptics out there.

For the moment, there are a lot of people that are declaring that the problems of the past have been fixed and that we are heading for incredibly bright economic times ahead.

Unfortunately, those people appear to be purposely ignoring the economic horror that is breaking out all over the globe.

The following are 18 signs that massive economic problems are erupting all over the planet…

#1 The eurozone is now in the midst of its longest recession ever.  Economic activity in the eurozone has declined for six quarters in a row.

#2 Italy’s economy has now been contracting for seven quarters in a row.

#3 Industrial production in Italy has fallen for 15 months in a row.  It has now fallen to its lowest level in about 25 years.

#4 The number of people that are considered to be “seriously deprived” in Italy has doubled over the past two years.

#5 Consumer confidence in France has just hit a new all-time low.

#6 The number of unemployed workers seeking a job in France has hit a brand new all-time record high.  Many unemployed workers in France are utterly frustrated at this point…

“I’ve sent CVs everywhere, I come to the unemployment agency every day, for 3 or 4 hours to look for work as a truck driver and there’s never anything,” said 42-year old Djamel Sami, who has been unemployed for a year, leaving a job agency in Paris.

#7 Unemployment in the eurozone as a whole has just hit a brand new all-time record high of 12.2 percent.

#8 Youth unemployment continues to soar to unprecedented heights in Europe.  The following is from an article that was recently posted on the website of the Guardian that detailed how bad things are getting in some of the worst countries…

In Greece, 62.5% of young people are out of work, in Spain it’s 56.4%, then Portugal with 42.5%, and then Italy with 40.5%.

#9 Youth unemployment is being partially blamed for the worst rioting that Sweden has seen in many years.  The following is how the Daily Mail described the riots…

Sweden is reeling after a third night of rioting in largely run-down immigrant areas of the capital Stockholm.

In the last 48 hours violence has spread to at least ten suburbs with mobs of youths torching hundreds of cars and clashing with police.

It is Sweden’s worst disorder in years and has shocked the country and provoked a debate on how Sweden is coping with youth unemployment and an influx of immigrants.

#10 An astounding 10 percent of all banking deposits were pulled out of banks in Cyprus during the month of April alone.

#11 Economic growth in India is the slowest that it has been in an entire decade.

#12 Suddenly Australia is experiencing some tremendous economic challenges.  The following quotes are from a recent Zero Hedge article…

-“We’re seeing a much sharper contraction in the Australian economy than we’d anticipated four or five months ago”. Coffey MD, John Douglas. The engineering group has seen its shares, which traded above $4 in 2007, hit 10c last week.

-“By 10am, the Fitness First gym in the city is packed full of brokers who’ve had a gutful of sitting at their desk doing nothing – salary cuts are starting and next it will be jobs” Perth broker

-“Oh mate, the funding market is dead. You are now seeing a few deeply discounted rights issues for those that are reaching desperate levels ….. liquidity has completely disappeared” Perth broker

#13 The financial system in Japan is beginning to spin wildly out of control.  The Japanese stock market has now declined about 15 percent from the peak, and many believe that the yen will continue to get weaker and that interest rates in Japan will start to rise significantly.

#14 Global cash flow is declining at a rate not seen since the last recession.  This indicates that we could be headed for a global credit crunch.

#15 Real wages continue to decline in the United States.  Even though we are being told that the U.S. is experiencing an “economy recovery”, real weekly earnings have declined from $297.79 in 2010 to $295.49 in 2011 to $294.83 in 2012.  (The preceding calculation is based on 1982-1984 dollars)

#16 Wall Street is buzzing about the fact that “the Hindenburg Omen” appeared at the end of last week.  So exactly what is “the Hindenburg Omen”?  The following are the criteria that are used to determine whether it has appeared or not…

1. The daily number of NYSE new 52 Week Highs and the daily number of new 52 Week Lows must both be greater than 2.2 percent of total NYSE issues traded that day.

2. The smaller of these numbers is greater than or equal to 69 (68.772 is 2.2% of 3126). This is not a rule but more like a checksum. This condition is a function of the 2.2% of the total issues.

3. That the NYSE 10 Week moving average is rising.

4. That the McClellan Oscillator ( a market breadth indicator used to evaluate the rate of money entering or leaving the market and interpretively indicate overbought or oversold conditions of the market)is negative on that same day.

5. That new 52 Week Highs cannot be more than twice the new 52 Week Lows (however it is fine for new 52 Week Lows to be more than double new 52 Week Highs).

When the Hindenburg Omen makes an appearance, it supposedly means that the U.S. stock market is likely to experience a serious decline within the next 40 days.

#17 As I wrote about the other day, the SentimenTrader Smart/Dumb Money Index is now the lowest that it has been in more than two years.  That means that lots of “smart money” has been getting out of the market and lots of “dumb money” has been pouring in.

#18 Margin debt on the New York Stock Exchange has set a new all-time high.  The following is from a recent Market Oracle article…

Margin debt—that’s the amount of money borrowed to purchase stocks—on the New York Stock Exchange (NYSE) reached its all-time high in April. Margin debt on the NYSE registered at $384.3 billion as the key stock indices hit new record-highs. (Source: New York Stock Exchange web site, last accessed May 29, 2013.) The highest margin debt ever reached prior to this was in July of 2007, when it stood just above $381.0 billion. At that time, just like today, the key stock indices were near their peaks and “buy now before it’s too late” was the prominent theme of the day

Whenever margin debt spikes like this, a stock market crash almost always follows.  If you doubt this, just check out the chart in this article.

Wall Street has had a good couple of years, but it has been a “false prosperity” that has been pumped up by reckless money printing by the Federal Reserve.  Just like all of the other stock market bubbles that we have seen in recent years, this one is going to burst too.  And as Marc Faber recently pointed out, this bubble has been particularly beneficial to the wealthy…

The Fed has been flooding the system with money. The problem is the money doesn’t flow into the system evenly. It doesn’t increase economic activity and asset prices in concert. Instead, it creates dangerous excesses in countries and asset classes. Money-printing fueled the colossal stock-market bubble of 1999-2000, when the Nasdaq more than doubled, becoming disconnected from economic reality. It fueled the housing bubble, which burst in 2008, and the commodities bubble. Now money is flowing into the high-end asset market – things like stocks, bonds, art, wine, jewelry, and luxury real estate.

Money-printing boosts the economy of the people closest to the money flow. But it doesn’t help the worker in Detroit, or the vast majority of the middle class. It leads to a widening wealth gap. The majority loses, and the minority wins.

The fact that the U.S. stock market has set new all-time record high after new all-time record high in recent months means very little.  At this point, the stock market has become completely divorced from economic reality.  When this current bubble bursts, the adjustment is going to be very painful.  Wall Street will likely whine and complain and ask for more bailouts, but they may find that authorities are not nearly as sympathetic this time.

Much of the rest of the world is already experiencing the next major wave of the economic collapse.  Reckless money printing by the Fed and reckless borrowing and spending by the federal government may have delayed the inevitable in the United States for a little while, but those measures have also made our long-term problems even worse.

There was one piece of advice that Ben Bernanke included in his commencement speech to students at Princeton recently that I thought was particularly ironic…

“Don’t be afraid to let the drama play out.”

Will he take his own advice when the next great financial crisis strikes the United States?

That seems very unlikely.

Unfortunately, things are not going to be so easy to fix this next time.

What happened back in 2008 was just a preview.

What is coming next is going to absolutely shock the world.

Why Is The Smart Money Suddenly Getting Out Of Stocks And Real Estate?

Exit Sign - Photo by SheDreamsInRedIf wonderful times are ahead for U.S. financial markets, then why is so much of the smart money heading for the exits?  Does it make sense for insiders to be getting out of stocks and real estate if prices are just going to continue to go up?  The Dow is up about 17 percent so far this year, and it just keeps setting new record high after new record high.  U.S. home prices have risen about 11 percent from a year ago, and some analysts are projecting that we are on the verge of a brand new housing boom.  Why would the smart money want to leave the party when it is just getting started?  Well, of course the truth is that the “smart money” is regarded as being smart because they usually make better decisions than other people do.  And right now the smart money is screaming that it is time to get out of the markets.  For example, the SentimenTrader Smart/Dumb Money Index is now the lowest that it has been in more than two years.  The smart money is busy selling even as the dumb money is busy buying.  So precisely what does the smart money expect to happen?  Are they anticipating a market “correction” or something bigger than that?

Those are very good questions.  Unfortunately, the smart money rarely divulges their secrets, so we can only watch what they do.  And right now a lot of insiders are making some very interesting moves.

For example, George Soros has been dumping almost all of his financial stocks.  The following is from a recent article by Becket Adams…

Everyone’s favorite billionaire investor is back in the spotlight, and this time he has a few people wondering what he’s up to.

George Soros has dumped his position with several major banks including JPMorgan Chase, Capitol One, SunTrust, and Morgan Stanley. He has reduced his exposure to Citigroup and decreased his stake in AIG by two-thirds.

In fact, Soros’ financial stock holdings are down by roughly 80 percent, a massive drop from his position just three months ago, according to SNL Financial.

So exactly what is going on?

Why is Soros doing this?

Well, there is certainly a lot to criticize when it comes to Soros, but you can’t really blame him if he is just taking his profits and running.  Financial stocks have been on a tremendous run and that run is going to end at some point.  Smart investors lock in their profits while they still can.

And without a doubt, stocks have become completely divorced from economic reality in recent months.  For example, there is usually a very close relationship between corporate earnings and stock prices.  But as CNBC recently reported, that relationship has totally broken down lately…

That trend disrupted a formerly symbiotic relationship between earnings and stock prices and is indicating that the bluechip average is in for a substantial pullback, according to Tom Kee, who runs the StockTradersDaily investor web site.

“They’ve been moving in tandem since 2009, until recently. Earnings per share for the Dow Jones industrial average have flatlined and the price has taken off,” Kee said. “There is something happening here that defines a bubble.”

At some point there will be a correction.  If the relationship between earnings and stock prices was where it should be, the Dow would be  around 13,500 right now.  That would be a fall of nearly 2,000 points from where it is at the moment.

And we appear to be entering a time when revenues at many corporate giants are actually declining.  As I noted in a previous article, corporate revenues are falling at Wal-Mart, Proctor and Gamble, Starbucks, AT&T, Safeway, American Express and IBM.

Of course a stock market “correction” can turn into a crash very easily.  Financial markets in Japan are already crashing, and many fear that the escalating problems in the third largest economy on the planet will soon spill over into Europe and North America.

And things in Europe just continue to get steadily worse.  In fact, the New York Times is reporting that the European Central Bank is warning that the risk of a “renewed banking crisis” in Europe is rising…

The European Central Bank warned on Wednesday that the euro zone’s slumping economy and a surge in problem loans were raising the risk of a renewed banking crisis, even as overall stress in the region’s financial markets had receded.

In a sober assessment of the state of the zone’s financial system, the E.C.B. said that a prolonged recession had made it harder for many borrowers to repay their loans, burdening banks that had still not finished repairing the damage caused by the 2008 financial crisis.

And there are many financial analysts out there that are warning that their cyclical indicators have peaked and that we are on the verge of a fresh global downturn…

“We see building evidence of a cyclical downturn,” said Fredrik Nerbrand, HSBC’s global asset guru. “We find it highly troubling that the eurozone is still marred in a recession at the same time as our cyclical indicators appear to have peaked.”

In the United States, a lot of the smart money has also decided that it is time to bail out of the housing market before this latest housing bubble bursts.  The following is one example of this phenomenon that was discussed in a recent Businessweek article…

Hedge fund manager Bruce Rose was among the first investors to coax institutional money into the mom and pop business of single-family home rentals, raising $450 million last year from Oaktree Capital Group LLC.

Now, with house prices climbing at the fastest pace in seven years and investors swamping the rental market, Rose says it no longer makes sense to be a buyer.

“We just don’t see the returns there that are adequate to incentivize us to continue to invest,” Rose, 55, chief executive officer of Carrington Holding Co. LLC, said in an interview at his Aliso Viejo, California office. “There’s a lot of — bluntly — stupid money that jumped into the trade without any infrastructure, without any real capabilities and a kind of build-it-as-you-go mentality that we think is somewhat irresponsible.”

So what does all of this mean?

Is there a reason why the smart money is suddenly getting out of stocks and real estate?

It could just be that the insiders are simply responding to market dynamics and that many of them are just seeking to lock in their profits.

Or it could be something much more than that.

What do you think?

Why are so many insiders heading for the exits right now?

Feel free to post a comment with your thoughts below…

 

Basel III: How The Bank For International Settlements Is Going To Help Bring Down The Global Economy

The Bank For International Settlements - Photo by Yago VeithA new set of regulations that most people have never even heard of that was developed by an immensely powerful central banking organization that most people do not even know exists is going to have a dramatic effect on the global financial system over the next several years.  The new set of regulations is known as “Basel III”, and it was developed by the Bank for International Settlements.  The Bank for International Settlements has been called “the central bank for central banks”, and it is headquartered in Basel, Switzerland.  58 major central banks (including the Federal Reserve) belong to the Bank for International Settlements, and the decisions made in Basel often have more of an impact on the direction of the global economy than anything the president of the United States or the U.S. Congress are doing.  All you have to do is to look back at the last financial crisis to see an example of this.  Basel II and Basel 2.5 played a major role in precipitating the subprime mortgage meltdown.  Now a new set of regulations known as “Basel III” are being rolled out.  The implementation of these new regulations is beginning this year, and they will be completely phased in by 2019.  These new regulations dramatically increase capital requirements and significantly restrict the use of leverage.  Those certainly sound like good goals, the problem is that the entire global financial system is based on credit at this point, and these new regulations are going to substantially reduce the flow of credit.  The only way that the giant debt bubble that we are all living in can continue to persist is if it continues to expand.  By restricting the flow of credit, these new regulations threaten to burst the debt bubble and bring down the entire global economy.

Not that the current global financial system is sustainable by any means.  Anyone with half a brain can see that the global financial system is a pyramid scheme that is destined to collapse.  But Basel III may cause it to collapse faster than it might otherwise have.

So precisely what is Basel III?  The following is a definition from the official website of the Bank for International Settlements…

“Basel III” is a comprehensive set of reform measures, developed by the Basel Committee on Banking Supervision, to strengthen the regulation, supervision and risk management of the banking sector. These measures aim to:

  • improve the banking sector’s ability to absorb shocks arising from financial and economic stress, whatever the source
  • improve risk management and governance
  • strengthen banks’ transparency and disclosures.

All of that looks good at first glance.  But when you start looking into the details you start realizing what it is going to mean for the global financial system.  Banks are going to be required to have higher reserve ratios and use less leverage.  Banks are going to have to be more careful with their money, which is a good thing, but it is also going to mean that credit will not flow as freely.  Unfortunately, the only way for a debt bubble to survive is if it keeps expanding.  Anything that restricts the flow of easy money threatens to bring a debt bubble to an end.

These new regulations are going to be phased in between 2013 and 2019.  You can see a chart which shows the implementation schedule for the Basel III regulations right here.

So why is bringing the debt bubble to an end a bad thing?

Well, because it will cause the false prosperity that we have been enjoying to disappear, and that will be an exceedingly painful adjustment.

Sadly, most people have no idea what is happening.  Most people have never even heard of “Basel III” or “the Bank for International Settlements”.  Most people just assume that the people they voted into office know what they are doing and have everything under control.

Unfortunately, that is not the case at all.  The truth is that an unelected, unaccountable body of central bankers is making decisions which deeply affect us all, and there is not much that we can do about it.

This unelected, unaccountable body of central bankers played a major role in bringing about the last financial crisis.  The following is a brief excerpt from a recent article posted on Before It’s News…

If you have any questions about the power of these Basel Banking Regulations you can also see the effects that Basel II and 2.5, mark to market accounting, had on the Housing Markets in the United States of America in 2008. There were many causes for that housing bubble, then housing crisis, but Basel II and 2.5 was most assuredly the pin that popped the housing bubble that led to the financial crisis of 2008-09.

But do most people know about this?

Of course not.  Most people want to blame the Republicans or the Democrats or Bush or Obama, and they have no idea about the financial strings that are being pulled at the highest levels.

It is so important that we get people educated about how the global financial system actually works.  The following is a summary of how the Bank for International Settlements works 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.

Even though most people have never even heard of the BIS, the truth is that the global elite have had big plans for it for a very long time.  In another article I included a quote from a book that Georgetown University history professor Carroll Quigley wrote many years ago entitled “Tragedy & Hope”…

[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.

Today we have such a system, and most of the public does not even know that it exists.

And when the next great financial crisis strikes, there will probably be very little ever said about the Bank for International Settlements in the mainstream media.

But right now the BIS is helping set the stage for the great credit crunch that is coming.

Get prepared while you still can, because time is running out.

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