My Financial Road Map For 2016

Submitted by Nomi Prins  –  www.nomiprins.com

Happy New Year to All! May 2016 bring peace to you and your loved ones.

Over the holidays, I had the opportunity to stay away from airports and hike Runyon Canyon with my dogs. For those of you that have never traversed Runyon’s peaks and dips, they are nature’s respite from the urban streets of Los Angeles, yet located in the heart of the City of Angels. It’s a place in which to observe, reflect, and think about what’s coming ahead.

As a writer and journalist covering the ebbs and flows of government, elite individual, central bank and private industry power, actions, co-dependencies, and impacts on populations and markets worldwide, I often find myself reacting too quickly to information. As I embark upon extensive research for my new book, Artisans of Money, my resolution for the book – and the year – is to more carefully consider small details in the context of the broader perspective. My travels will take me to Brazil, Mexico, China, Japan, Germany, Spain, Greece and more. My intent is to converse with people in their respective locales; those formulating (or trying to formulate) monetary, economic and financial policy, and those affected by it.

We are currently in a transitional phase of geo-political-monetary power struggles, capital flow decisions, and fundamental economic choices. This remains a period of artisanal (central bank fabricated) money, high volatility, low growth, excessive wealth inequality, extreme speculation, and policies that preserve the appearance of big bank liquidity and concentration at the expense of long-term stability. The potential for chaotic fluctuations in any element of the capital markets is greater than ever.

The butterfly effect – the flutter of a wing in one part of the planet altering the course of seemingly unrelated events in another part – is on center stage. There is much information to process. So, I’d like to share with you – not my financial predictions for 2016 exactly – – but some of the items that I will be examining from a geographical, political and financial perspective as the year unfolds.

1) Central Banks: Artisans of Money

Since the Fed raised (hiked is too strong a word) rates by 25 basis points on December 16^th, the Dow has dropped by about 3.5%. Indicating a mix of fear of decisive movements and a market awareness deficit regarding the impact of its actions, the Federal Reserve hedged its own rate rise announcement, noting that its “stance of monetary policy remains accommodative after this increase.”

These words seem fairly clear: there won’t be many, if any, hikes to come in 2016 unless economies markedly improve (which they won’t, or the words would be much more definitive.) Still, Janet Yellen did manage to alleviate some stress over the Fed’s inaction on rate rises during the past 7 years, by invoking the slighted action possible with respect to rates.

Projections are past reactions here. The Fed, to save face more than anything or to “appear” conclusive, raised the Fed Funds rate (the rate US banks charge each other to borrow excess reserves, of which about $2.5 billion are with the Fed anyway), to .25-.50% from 0-.25%. And yet, the effective rate stood within the old Fed target range, or at an average of .20% on December 31 for various reasons, the timing of which was not lost on the Fed. It was at .35% or so on the first day of 2016. The Fed’s rate move was tepid, and it’s possible the Fed moves rates up another 25 or 50 basis points over 2016, but less likely more than that and more likely it engages in heightened currency swap activities with other central banks as a way to “manage” rates and exchange rates regardless.

Meanwhile, most other central banks (Brazil being an extreme counter example) remain in easing mode or mirror mode to the Fed. It’s likely that more creative QE measures amongst the elite central banks will pop up if liquidity, markets or commodities head southward. Less powerful central banks will attempt to respond to the needs of their local economies while balancing the strains imposed upon them by the elite central banks.

Mexico, Federal Reserve Policy and Danger Ahead for Emerging Markets

Submitted by Nomi Prins  –  www.nomiprins.com

On August 27th, I had the opportunity to address the Aspen Institute, UNIFIMEX and PWC in Mexico City during a Q&A with Patricia Armendariz. Subsequently, on August 28th, I gave the opening talk at the annual IMEF conference. The main issues of concern to local Mexican banks, as well as to Mexico’s central bank, are:

1) How the Federal Reserve’s (and to a lesser extent ECB’s and People’s Bank of China) policies and actions have, and wlil continue to impact their currency and interest rate levels, and

2) The risks posed by the structural, and ongoing problems of too-big-to-fail banks, which remain as much a US as a Mexican problem as manifested by heightened economic, market and financial stress.

I posted the slides from my talk here, including the ten main risks that Mexico (and really all countries) are facing today, as well as the four factors of volatility that I have spoke about many times before. Much uncertainly emanates from central bank policy and the associated artificial stimulation of mega banking institutions and capital markets throughout the world. There is no foreseeable remedy to the long-term damage already caused, and that will continue to grow in the future.

What follows is a related piece that I co-authored with researcher, Craig Wilson that first appeared in Peak Prosperity:

Too big to fail is a seven-year phenomenon created by the most powerful central banks to bolster the largest, most politically connected US and European banks. More than that, it’s a global concern predicated on that handful of private banks controlling too much market share and elite central banks infusing them with boatloads of cheap capital and other aid. Synthetic bank and market subsidization disguised as ‘monetary policy’ has spawned artificial asset and debt bubbles – everywhere. The most rapacious speculative capital and associated risk flows from these power-players to the least protected, or least regulated, locales.

The World Bank and IMF award brownie points to the nations offering the most ‘financial liberalization’ or open market, privatization and foreign acquisition opportunities. Yet, protections against the inevitable capital outflows that follow are woefully inadequate, particularly for emerging markets.

In a World of Volatility and Artificial Liquidity for Banks, Update your Cash Strategy

Submitted by Nomi Prins  –  www.nomiprins.com

Global central banks are afraid. Before Greece stood up to the Troika, they were merely worried. Now it’s clear that no matter what they tell themselves and the world about the necessity or even righteousness of their monetary policies, liquidity can still disappear in an instant. Or at least, that’s what they should be thinking.

The Federal Reserve and US government led policy of injecting liquidity into the US and then into the worldwide financial system has resulted in the issuance of trillions of dollars of debt, recycling it through the largest private banks, and driving rates to 0% — or below. The combined book of debt that the Fed and European Central Bank (ECB) hold is $7 trillion. None of that has gone remotely into fixing the real global economy. Nor have the banks that have ben aided by this cheap money increased lending to the real economy. Instead, they have hoarded their bounty of cash. It’s not so much whether this game can continue for the near future on an international scale. It can. It is. The bigger problem is that central banks have no plan B in the event of a massive liquidity event.

Some central bank entity leaders have admitted this. IMF chief, Christine Lagarde for instance, warned Federal Reserve Chair, Janet Yellen that potential US rate hikes implemented too soon, would incite greater systemic calamity. She’s not wrong. That’s what we’ve come to: a financial system reliant on external stimulus to survive.

These “emergency” measures were supposed to have healed the problems that caused the financial crisis of 2008 — the excessive leverage, the toxic assets wrapped in complex derivatives, the resultant credit and liquidity crunch that occurred when banks lost faith in each other. Meanwhile, the infusion of cheap money and liquidity into banks gave a select few of them more power over a greater pool of capital than ever. Stock and bond markets skyrocketed as a result of this unprecedented central bank support.

QE-infinity isn’t a solution — it’s a deflection. It’s a form of financial subterfuge that causes extra problems. These range from asset bubbles to the inability of pension and life insurance funds to source longer term less risky long-term assets like government bonds, that pay enough interest for them to meet liabilities. They are thus at risk of rapid future deterioration and more shortfalls precisely because they have nothing to invest in besides more risky stock and lower-rated bond markets.

Even the latest Bank of International Settlement (BIS) 85^th Annual Report revealed the extent to which global entities supervising the banking system are worried. They harbor growing fears about greater repercussions from this illusion of market health (echoing concerns I and others have been writing about for the past seven years.)

The BIS, or bank for the central banks was established during the global Great Depression in 1930 in Basel, Switzerland, when bank runs on people’s deposits were the norm. The body no longer buys into zero-interest rate policy as an economic cure-all. In their words, “Globally, interest rates have been extraordinarily low for an exceptionally long time, in nominal and inflation-adjusted terms, against any benchmark. Such low rates are the remarkable symptom of a broader malaise in the global economy.”

My Review of Clinton Cash and Why it Matters

Submitted by Nomi Prins  –  www.nomiprins.com

Bill and Hillary Clinton have formed political-financial alliances that few former presidents and first ladies have ever established, let alone, have couples seeking to become president and first gentleman. In Peter Schweizer’s latest smash expose, Clinton Cash: The Untold Story of How and Why Foreign Governments and Businesses Helped Make Bill and Hillary Rich, he follows the money between their public office and private citizen exploits, through the mega successful, Clinton Foundation. Since 2001, the Clinton Foundation has amassed a staggering $2 billion, mostly in chunks from globally powerful individuals, multinational companies and foreign countries.

Schweizer lays out compelling patterns in which the timing of policy decisions or international deals relative to donations, transcends coincidence – or at least, merits closer inspection. He narrates with crisp prose and illuminating detail. Though a few errors exist about certain speaking fees and event sequences, there’s no question that Bill Clinton’s speaking fees rose substantially after Hillary took the helm of State, as did Clinton Foundation donations from foreign countries and certain controversial operators.

The book runs 245 pages with an impressive 56 pages of endnotes. It might be tempting to dismiss Clinton Cash as a product of Schweizer’s own conservative leanings. Yet, his more recent works, Throw Them All Out and Extortion, have examined shenanigans on both sides of the aisle.

Plus, placing issues of possible impropriety or illegality in a partisan box, ignores the dangers of an oligarchical political system that hopelessly blurs public and private lines. The Clintons are champions of the ‘Clinton Blur’ as Schweizer dubs two of his chapters.

The Clintons are not alone in fusing the lines of public service and private positioning. As first lady, Eleanor Roosevelt ran many charitable initiatives. Yet, unlike Bill Clinton, who claims he needs high speaking fees to “pay our bills”, she donated her writing fees. President Harry Truman bestowed his humble post-presidential speaking fees to build the Truman Library. The Carters run the Carter Center dedicated to humanitarian causes. The George W. Bush Foundation raised more than $341 million from 2006 to 2011. Nearly half of the 2010-2011 funds came from 16 donors, which begs further investigation. Still, those figures pale in comparison to the Clinton Foundation money and power machine.

The Clintons, and various members of the press, have condemned Clinton Cash, both for what they deem to be unsubstantiated slams, and for being misleading and containing certain factual errors. For the most part, these beckon further debate and exploration, rather than being downright wrong.

For instance, in Chapter 3, Hillary’s Reset, Schweizer indicates Hillary was involved in approving the sale of a Canadian company, Uranium One, which held a large stake in US uranium output to the Russian State Atomic Nuclear Agency (Rosatom). A Time magazine article found nothing linking Hillary specifically (or solely) to the related conversations. Yet, large donations did came from Uranium One Chairman, Ian Telfer, concurrent with the deal, and while Hillary Clinton was Secretary of State.

Schweizer concedes in Chapter 5, The Clinton Blur (1) that, “The Clinton’s ability to convene various public and private interests around a common cause or project does create leverage for getting things done in the global arena.” But, he goes on to say, “the blur also creates opportunity for moving a lot of money around with very little accountability.”

Certain longtime Clinton supporters are sketchy to criminal in behavior. One of them, Vinod Gupta, Indian entrepreneur and founder and chairman of InfoUSA, was a Clinton Foundation trustee. In 2010, he was charged with fraud by the Securities and Exchange Commission (SEC) for using $9.5 million in company funds to support his extravagant lifestyle. He settled with the SEC for $7.3 million. His shareholders filed a separate suit over “misuse of corporate funds” including a $3 million consulting fee to Bill Clinton and “using corporate assets to fly the Clintons around.” The company settled for $13 million.

Sant Singh Chatwal, another trustee, was convicted for illegal campaign financing and obstruction of justice. He got no jail-time. Clinton Foundation board member, Argentine mogul, Rolando Gonzalez Bunster, was named in a fraud case in the Dominican Republic.

One could argue that it’s not the Clintons fault that some of their star supporters have such legality issues, though the company they keep renders their dismissals of conflicts of interest claims, less palatable. Maybe they should hang with a better class of billionaires?

By Schweizer’s tabulation, approximately 75% of the Clinton Foundation’s money has come from contributions of $1 million or more, with a fair share from foreign nationals. Some of that money buys respect in the Clinton circle, if not overt policy favoritism. Notable dictators from countries like Ethiopia and Rwanda were invited guests at Clinton Foundation events and praised for their leadership.

Some of that money secures profitable business deals. In 2009, Schweizer writes, Hillary Clinton “pushed Russian officials to sign a [$3.7 billion] airplane agreement with Boeing. Two months after Boeing won the contract, the company pledged $900,000 to the Clinton Foundation.” In Haiti, Schweizer depicts certain disaster-relief contracts as awarded along the lines of Clinton Foundation donors. These depictions have been criticized for accuracy, though still point toward partiality, if not direct money flow.

Beginning in 2009, Schweizer writes, “Swedish telecom giant Ericsson came under US pressure for selling telecom equipment to oppressive governments,” including to Sudan, Syria, and Iran and Belarus. Erickson decided to sponsor a speech for which Bill Clinton received a record $750,000 at a Telecom conference. A week later on November 19^th, 2011, the State Department had removed telecoms from its sanctions list. The causality again isn’t distinctly proven. However the order of events is eye raising.

In Chapter 8, Warlord Economics, Schweizer writes that as a senator, Hillary “took the lead in rooting out Democratic Republic of Congo (DRC) corruption and violence.” But when she became Secretary of State, her stance had softened considerably. According to Schweizer, certain “changes in policies conformed with the interest of Clinton Foundation large donors.”

Hillary Comes to Hollywood for Money-Raising Shindigs

Submitted by Nomi Prins  –  www.nomiprins.com

Hillary arrives in Hollywood today, to raise more than $2.5 million. Money and power mesh like peanut butter and jelly in Washington, Wall Street and Hollywood. The path toward influence is lined with the casualties or victories of status, wealth, and ego. Two presidential elections ago, Hollywood created its own underdog when it poured backing into the coffers of Barack Obama, shunning Hillary Clinton. But Hollywood loves a good comeback story in politics or on the silver screen. Enter Democratic presidential hopeful, Hillary and Hollywood money, Part II.

On May 7^th, three private fundraisers kick off the first of many legs of Hillary Clinton’s 2016 election Hollywood campaign. First, there is a breakfast reception at the Westwood home of Public Affairs consultant, Catherine Unger. Then comes a luncheon at the Pacific Palisades abode of Steven and Dayna Bochco. (Steven Bochco Productions contributed $373,000 to Democrats over the last four campaign cycles.) The main evening event takes place at the Beverly Park estate of Chairman and CEO of Saban Capital Group, Haim Saban, and his wife, Cheryl. The couple and the Saban family foundation are listed in the $10-$25 million bracket of the Clinton Foundation contributors. The crème-de-la-crème of Tinsel town will clank their glasses for their ‘Champion’ of inequality far above the inequality rampaging the City of Angels.

Co-hosting will be an assortment of legacy media heavy hitters including the Sabans, Casey Wasserman, a trustee of the William J. Clinton Foundation, and Jeffrey Katzenberg. Event tickets are $2700, the maximum individual limit for primary period contributions. This would put Hillary Clinton’s May 7^th Hollywood haul at about $2.6 million. More important than these initial outlays though, is their promise of solidarity. Hollywood stands ready for Hillary.

Indeed, Hollywood is expected to unite for a chance to spend money on Clinton’s campaign, in contrast to its prior loyalty abscess, which accelerated into cacophonous Barack Obama support early in the 2008 election cycle. The question is – will it spend as much? That answer will depend on the GOP and whether the rest of the Democratic field opens up, as with Senator Bernie Sanders’ April 29^th declaration that he would run for president as a Democrat.

The Bigwig: Jeffrey Katzenberg

According to the Washington-based non-partisan, non-profit research group, Center for Responsive Politics, DreamWorks Animation CEO Jeffrey Katzenberg reigns supreme over Hollywood glitterati in terms of most consistent and varied monetary support for the Democratic Party and its anointed ones.

Most people think of political contributions in terms of individual or aggregated corporate donations. That’s just the tips of the iceberg. Money flows into Capitol Hill in many forms. These include donating directly to candidates and bundling (or tapping all your rich friends and associates to contribute under your name before handing over a mega check). More ways to fork over dough consist of contributing to political action committees (PACs) or super PACs that do the same thing once removed, and ‘other’ avenues like paying $50K a pop to attend the Inaugural Ball, something stars such as Halle Berry, Sharon Stone, Neil Diamond and Jamie Foxx did for Obama’s 2009 victory gala.

Katzenberg was the top Hollywood bundler for Barack Obama’s 2012 campaign. Last year, shifting gears back to prep for the 2016 election, he co-hosted a fundraiser featuring Hillary Clinton that raised $2.1 million for the Democrats.

Decisions: Life and Death on Wall Street by Janet M. Tavakoli: My Review

Submitted by Nomi Prins  –  www.nomiprins.com

Janet Tavakoli is a born storyteller with an incredible tale to tell. In her captivating memoir, Decisions: Life and Death on Wall Street, she takes us on a brisk  journey from the depravity of 1980s Wall Street to the ramifications of the systemic recklessness that crushed the global economy. Her compelling narrative sweeps through her warnings about the dangers of certain bank products in her path-breaking books, speeches before the Federal Reserve, and in talks with Jaime Dimon.

She probes the moral complexity behind the lives, suicides and murders of international bankers mired in greed and inner conflict. Some of the people that touched her Wall Street career reflect broken elements of humanity. The burden of choosing money and power over values and humility translates to a loss for us all.

To truly understand the stakes of the global financial game, you must know its building blocks; the characters, testosterone, and egos, as well as the esoteric products designed to squeeze investors, manipulate rules, and favor power-players. You had to be there, and you had to be paying attention. Janet was. That’s what makes her memoir so scary. InDecisions, she breaks the hard stuff down with humor and requisite anger. As a side note, her international banking life eerily paralleled my own – from New York to London to New York to alerting the public about the risky nature of the political-financial complex.

Her six chapters flow along various decisions, as the title suggests. In Chapter 1 “Decisions, Decisions”, Janet opens with an account of the laddish trading floor mentality of 1980s Wall Street. In 1988, she was Head of Mortgage Backed Securities Marketing for Merrill Lynch.  Those types of securities would be at the epicenter of the financial crisis thirty years later.

Each morning she would broadcast a trade idea over the ‘squawk box.‘ Then came the stripper booked for a “final-on-the-job-stag party.” That incident, one repeated on many trading floors during those days, spurred Janet to squawk, not about mortgage spreads, but about decorum. Merrill ended trading floor nudity and her bosses ended her time in their department. Her bold stand would catapult her to “a front row seat during the biggest financial crisis in world history.” Reading Decisions, you’ll see why this latest financial crisis was decades in the making.

In Chapter 2 “Decision to Escalate”, Janet chronicles her work with Edson Mitchell and Bill Broeksmit, who hired her to run Merrill’s lucrative asset swap desk after the stripper incident. Bill and Janet shared Chicago roots and MBAs from the University of Chicago. Janet became wary of the serious credit problems lurking beneath asset swap deals, many of which involved fraud. The rating agencies were as oblivious then, as they were thirty years later. Transparency was important to Janet. She and Bill “agreed to clearly disclose the risks—including [her] reservations about “phony” ratings.” Many Merrill customers with high-risk appetites didn’t care. They got burned when the underlying bonds defaulted.  Rinse. Repeat.

During that time, Janet penned a thriller, Archangels: Rise of the Jesuits, eventually published in late 2012. It probed the suspicious death of shady Italian banker Roberto Calvi. In June 1982, Calvi was found hanged from scaffolding under London’s Blackfriars Bridge. Ruled a suicide, the case re-merged in 2002 when modern forensics determined Calvi was murdered. Neither Bill nor Janet bought the suicide story; though Bill joked he’d never hang himself.   

Presidents, Bankers, the Neo-Cold War and the World Bank

Submitted by Nomi Prins  –  www.nomiprins.com

At first glance, the neo-Cold War between the US and its post WWII European Allies vs. Russia over the Ukraine, and the stonewalling of Greece by the Troika might appear to have little in common. Yet both are manifestations of a political-military-financial power play that began during the first Cold War. Behind the bravado of today’s sanctions and austerity measures lies the decision-making alliance that private bankers enjoy in conjunction with government and multinational entries like NATO and the World Bank.

It is President Obama’s foreign policy to back the Ukraine against Russia; in 1958, it was the Eisenhower Doctrine that protected Lebanon from a Soviet threat. For President Truman, the Marshall Plan arose partly to guard Greece (and other US allies) from Communism, but it also had lasting economic implications. The alignment of political leaders and key bankers was more personal back then, but the implications were similar to the present day. US military might protected its major trading partners, which in turn, did business with US banks. One power reinforced the other. Today, the ECB’s QE program funds swanky Frankfurt headquarters and prioritizes Germany’s super-bank, Deutschebank and its bond investors above Greece’s future.

These actions, then and now, have roots in the American ideology of melding military, political and financial power that flourished in the haze of World War II.  It’s not fair to pin this triple-power stance on one man, or even one bank; yet one man and one bank signified that power in all of its dimensions, including the use of political enemy creation to achieve financial goals. That man was John McCloy, ‘Chairman of the Establishment’ as his biographer, Kai Bird, characterized him. The relationship between McCloy and Truman cemented a set of public-private practices that strengthened private US banks globally at the expense of weaker, potentially Soviet (now Russian) leaning countries.

When Artificial Debt Buying Stops, Things Will Come Apart – Nomi Prins

Submitted by Nomi Prins  –  www.nomiprins.com

Courtesy of Greg Hunter – USA WatchDog

The Volatility / Quantitative Easing Dance of Doom

Submitted by Nomi Prins  –  www.nomiprins.com

The battle between the ‘haves’ and ‘have-nots’ of global financial policy is escalating to the point where the ‘haves’ might start to sweat – a tiny little. This phase of heightened volatility in the markets is a harbinger of the inevitable meltdown that will follow the grand plastering-over of a systemically fraudulent global financial system. It’s like a sputtering gas tank signaling an approach to ‘empty’.

Obscene amounts of central bank liquidity applauded by government leaders that have protected the political-financial establishment with failed oversight and lack of foresight, have coalesced to form one of the most unequal, unstable economic environments in modern history. The ongoing availability of cheap capital for big bank solvency, growth and leverage purposes, as well as stock and bond market propulsion has fostered a false sense of economic security that bares little resemblance to most personal realities.

We are entering the seventh year of US initiated zero-interest-rate policy. Biblically, Joseph only gathered wheat for seven years before seven years of famine. Quantitative easing, or central bank bond buying from banks and the governments that sustain them, has enjoyed its longest period of existence ever. If these policies were about fortifying economic conditions from the ground up, fostering equality as a force for future stability, they would have worked by now. We would have moved on from them sooner.

But they aren’t. Never were. Never will be. They were designed to aid big banks and capital markets, to provide cover to feeble leadership. They are policies of capital creation, dispersion and global reallocation.  The markets have acted accordingly.

What began with the US Federal Reserve became a global phenomenon of subsidizing the financial system and its largest players.  Most real people – that don’t run hedge funds or big banks or leverage other peoples’ money in esoteric derivatives trades – have their own meager fortunes at risk. They don’t have the power of ECB head, Mario Draghi to issue the ‘buy’ order from atop the ECB mountain. Nor do they reap the benefits.

Retail sales are down because people have no extra money and can’t take on excess debt through credit cards forever. They aren’t governments or central banks that can print when they want to, or big private banks that can summon such assistance at will.

Federal Reserve Chair, Janet Yellen recently chastised these bankers. This, while the Fed has become their largest client and the world’s biggest hedge fund.  While she wags her finger, the Fed is paying JPM Chase to manage the $1.7 trillion portfolio of mortgage related assets that it purchased from the largest banks. In other words, somewhere along the line, the public is both paying to buy nefarious assets from the big banks at full value, thereby supporting an artificially higher price and demand for these and similar assets,and paying the nation’s largest bank for managing them on behalf of the Fed. Yellen says things like “poor values may undermine bank safety” and all of a sudden she’s on an anti-bank rampage?  What about the fact that just six banks control 97% of all trading assets in the US banking system and 95% of derivatives? Or that 30 banks control 40% of lending and 52% of assets worldwide?

Nomi Prins: The Sinister Evolution Of Our Modern Banking System

Submitted by Nomi Prins  –  www.nomiprins.com

The 2015 Financial Meltdown & More

Submitted by Nomi Prins  –  www.nomiprins.com

This week, I had the pleasure of being interviewed by Greg Hunter at USA Watchdogregarding my thoughts on the state of the global markets, economies and commodities into 2015.  Here are some key points we covered. For more detail, please check out thevideo of our interview here.

1) On the Market Meltdown: When I spoke with Greg about 9 months ago, I said that based on logic and the political-economic history I had explored for All the Presidents’ Bankers, there should have already been another major implosion following the 2008 financial crisis. However, there is an element of history that is unprecedented and which has acted as a barrier, albeit tenuous and fabricated, to another full-blown, transparent crisis. The scope of the zero-interest-rate policy and QE programs that emanated from the US Federal Reserve and have unfolded throughout the world are artificially bolstering market and financial interests as populations falter. In the US, this has been greeted by proclamations of economic victory from the Obama administration. In Europe, it’s harder to tweak the employment stats enough to declare the same thing, and hence, official QE programs there are ongoing. At any rate, this prolonged policy of injecting cheap money into the banks and markets, funded by the public due to the very nature of debt-creation and the purchasing of government and asset-backed debt securities, now surpasses any past measures of such activities in terms of scope and length.

The fact that these policies lasted for six years has inflated and distorted bond and stock markets, as well as the books of the world’s largest financial institutions to such an extent, that inherent ‘value’ in any of these areas is impossible to determine. We are living with the instability of a system that is supported by central bank maneuvers and the leveraging of them, not by anything organic or independently sustainable. Because rates are so low, any establishment with access to this cheap capital, or that has other people’s money to burn, is creating bubbles by reaching for returns anywhere – in government bonds, stock markets, leveraged loans in debt-intensive firms like oil and gas, and in complex derivative products consisting of currency, commodity and credit elements.

Steaming about Big Bank Con: Email from a Concerned Senior

Submitted by Nomi Prins  –  www.nomiprins.com

Everyday I receive anguished emails from concerned citizens regarding the state of the economy, Wall Street, the political-financial system, and how their future stability is impacted by the powers that be. This one stood out for its clarity, as well as being indicative of one of the many ways in which the banking system regularly undermines people’s economic stability by targetting their savings accounts (which thanks to the Fed’s zero-interest-rate policy receive no interest, and thus, no relatively risk-free returns) for high-fee asset management services.

The Clinton administration’s 1999 repeal of Glass-Steagall, plus the two prior decades of various measures that weakened the intent of this 1933 Act that separated banks’ speculation activities from deposit and lending ones, has enabled big banks to engage in all manners of trading, leverage, and ill-concocted investment schemes, while holding trillions of dollars of individuals’ deposits.

It was Charles Mitchell, head of National City Bank (now Citigroup) back in the 1920s that realized if his bank could corner the deposits of ‘the Everyman’, it would be better positioned to engage in the bigger transactions that would catapult it to a financial superpower, as well as use the accounts for additive domestic gain. Nearly a century later, this aspect of converting depositor/savers to commission-providing risk-takers, provides fees to bankers, absent true responsibility for any related downside (as in the ‘past behavior is not indicative of future results’ small print.)

But people should not act upon the “guidance” of the investment advisors resident at the very big banks where they keep their savings and other money – this leaves too much room for manipulation of their trust and money. And if legislation and politicians won’t divide these two financial items, people must do so for themselves.

For the evolution of institutionalized, government and central bank supported speculation has left populations footing the bill for bets taken beyond their knowledge and certainly, control. Even those people that believe they are taking the prudent steps with respect to their own financial situations as they approach old-age, are victims of a churn-and-burn mentality that incurs unnecessary fees and bonuses for the perpetrators, at their expense.